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Japanese Finance Minister Shunichi Suzuki and senior currency diplomat Masato Kanda opted for a measured silence on Wednesday regarding foreign exchange matters, as the yen soared to its highest level against the dollar in over two months.
Addressing inquiries about the yen’s sharp appreciation, Suzuki chose restraint, emphasizing potential unforeseen market impacts if he were to comment.
Similarly, Kanda, Vice Finance Minister for International Affairs, echoed Suzuki’s caution regarding speculative movements influencing the yen’s recent strength. He refrained from further elaboration on market dynamics.
The yen’s ascent, surpassing a 1% increase on Wednesday to its strongest position since May, reflects a widespread unwinding of short-yen positions ahead of the upcoming Bank of Japan policy review. Analysts anticipate discussions on potential interest rate adjustments during the review.
Speaking to reporters in Rio de Janeiro following a Group of Seven (G7) finance leaders’ meeting on the sidelines of a G20 gathering, Suzuki and Kanda’s reserved stance diverged from earlier statements this month. Previously, Tokyo was suspected of significant market intervention, spending approximately 6 trillion yen ($39.22 billion) to bolster the yen, which had languished near 38-year lows below 160 per dollar.
Kanda clarified that foreign exchange issues were not a focal point during Wednesday’s G7 discussions but affirmed their routine inclusion in G7 deliberations.
In response to mounting calls for clarity on the Bank of Japan’s rate hike strategy to stabilize the yen, some politicians advocate preemptive measures to prevent further depreciation against the dollar, underscoring the pressure on Japan’s central bank.
While a weaker yen traditionally supports exports, concerns have emerged among policymakers over its impact on import costs and domestic consumption.
Kanda noted that Wednesday’s G7 meeting also addressed issues related to China’s surplus industrial capacity but declined to elaborate further.
He highlighted “significant progress” made by G7 finance leaders in discussions concerning the utilization of frozen Russian sovereign assets to support a proposed $50 billion loan to Ukraine, withholding specifics on the ongoing negotiations.
The careful approach of Japanese officials amidst global financial volatility underscores their strategic restraint in addressing currency movements, reflecting broader economic sensitivities and international financial diplomacy.