| 1 December 2023, Friday |

IMF sees recent yen falls as reflecting fundamentals

The yen’s recent declines are driven by fundamentals and do not meet any of the considerations that would call for authorities to intervene in the currency market, a senior International Monetary Fund official said on Saturday.

“On the yen, our sense is that the exchange rate is driven pretty much by fundamentals. As long as interest rate differentials remain, the yen will continue to face pressure,” Sanjaya Panth, deputy director of the IMF’s Asia and Pacific Department, told reporters.

Authorities in Japan are facing renewed pressure to combat a sustained depreciation in the yen , as investors bet on higher-for-longer U.S. interest rates while the Bank of Japan remains wedded to its super low interest rate policy.

The IMF sees foreign exchange intervention as justified only when there is a severe dysfunction in the market, a heightening of financial stability risks, or a de-anchoring of inflation expectations, Panth said.

“I don’t think any of the three considerations are existing right now,” he said, when asked whether recent yen falls call for authorities to intervene in the currency market.

Japan bought yen in September and October last year, its first foray in the market to boost the currency since 1998, to stem sharp declines that eventually pushed the yen to a 32-year low of 151.94 to the dollar.

The dollar fetched 149.57 yen on Friday.

  • Reuters