Yen intervention won't stop sharp losses, officials warn

by Kaori Kaneko and Daniel Leussink TOKYO (Reuters) – Japan’s efforts to stem a sharp fall in the yen through unilateral market intervention will have only limited impact, a senior member of the country’s ruling party has warned as data show the currency’s recent plunge The trade deficit has reached record levels. the yen held on it hit a year low against the dollar on Thursday, a day after authorities issued By far the clearest signal that they were nervous about the recent surge and the currency fell and was ready to intervene. Yen last trade 11.08 fell about 0.3%, on Wednesday on news that the exchange rate against the dollar may rise against the intervention. Katayama Satsuki, head of the Financial Affairs Research Committee of the ruling Liberal Democratic Party (LDP), said Tokyo’s lack of effective means to deal with the devaluation of the yen and unilateral intervention will be subject to limit. Katayama said in an interview with Reuters on Wednesday that “monetary intervention alone would not be as effective” to stop the yen from falling sharply, led by the United States and Japan. driven by the spread between. Continued high inflation in the U.S. and elsewhere forced the Federal Reserve to hike rates aggressively, giving the U.S. dollar a significant yield advantage, triggering a sharp rally against the U.S. dollar global peers, including the yen. Katayama, who is also a former Ministry of Finance (MOF) official with expertise in financial markets, said that raising Japan’s ultra-low interest rates could The country35 trillion yen ($3.35 trillion) bank loans. This view was endorsed by opposition Democratic Party leader Yuichiro Tamaki, who said that raising interest rates would play a greater role in economic harm. More than profit, it calls for more financial support. The Bank of Japan conducted an interest rate review with banks on Wednesday and was apparently ready to step in to reduce the yen’s losses, which sent the yen up more than 1% and Underscoring its nervousness about the sharp decline. weaker currency Japan’s policy makers have historically supported currency devaluation, which makes Exports are more competitive, but now there are fears that it will have an inflationary effect. Everything from food and eating out to utilities and transport has become more expensive. analysts say the rate checks will only provide short-lived support for the currency as Tokyo may struggle to get G7 peers to agree to proceed Yen buying intervention. Other Asian economies are also turning their attention to the risks posed by currency devaluation. In South Korea, the country’s foreign exchange authority is seen as selling dollars to curb the won’s fall after the currency touched near – 1/2 year.