Japan's Finance Minister Ready for "Decisive" Action on Yen Speculation

The Japanese government’s Finance Minister, Shunichi Suzuki, says the country is prepared to take “decisive” action in the foreign exchange (forex) markets to ease the volatility surrounding the yen. Suzuki warned that it would only be forced to do so if investors continued to sell off the yen at remarkable speed.

Masakazu Tokura, head of Japan’s leading business lobbying organization, Keidanren, said the interventions proved “meaningful”, not least in showing “its will”. Tokura hoped that such measures wouldn’t be required “so frequently” in the months ahead.

The USD/JPY forex pair is one of the most influential in the global currency markets. It’s one of a handful of forex pairs known as “major pairs” in the market. Major forex pairs are the most accessible for retail traders to buy and sell through online brokers, with these liquid instruments made available 24 hours a day, five days a week. Some brokers make it possible for retail traders to profit regardless of whether a major forex pair rises or falls in value. At INFINOX it’s possible to trade a variety of options such as forex and CFDs that allow traders to speculate on the rise and fall of the underlying asset – in this case, the USD/JPY. Traders can short-sell the USD/JPY if they feel the yen is likely to remain weak.

Why doesn’t the Bank of Japan raise interest rates to combat inflation?

One of the big reasons why the yen – and many other foreign currencies like the British pound – have struggled so badly against the US dollar of late is Japan’s dovish approach to interest rates. Haruhiko Kuroda, governor of the Bank of Japan, continues to insist that monetary easing remains vital to the Japanese economy in its fight against deflation – despite inflation moving above its 2% benchmark target. Kuroda and other analysts believe it’s likely to fall again next year, with the need for more stable wager gains before sustainable inflation is achieved.

A weakened yen has been a boon for Japan-based conglomerates with multinational operations. In fact, corporate profits have been reported at a level not seen in almost 70 years. On the flip side, the weaker yen makes imports increasingly expensive, hitting consumers harder, given that paychecks are not aligned with the rising cost of living.

The pressure is most definitely rising on Prime Minister Fumio Kishida. Having endorsed the Bank of Japan’s approach by ramping up near-term government spending, Japan is charting a different course from the rest of the developed economies that have focused squarely on monetary policy to stall inflation.