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Yen Slips Below 145 Yen/USD Amidst Japanese Government’s FX Market Intervention

In a significant development, the Japanese yen has weakened to levels below 145 yen per dollar, marking the first instance of such depreciation since November 2022. This slide in the yen’s value has ignited speculations surrounding potential intervention by the Japanese government in the foreign exchange market.

The ongoing depreciation of the yen can be traced back to the policy adjustments made by the Bank of Japan (BOJ) in late July. The BOJ’s decision to manage the bond yield curve has inadvertently triggered a decline in the yen’s value. Consequently, the prices of 10-year Japanese government bonds have surged to their highest point in nine years.

Analysts at HSBC are of the view that the Japanese Ministry of Finance might consider intervening in the market to restore the yen’s value within the 145-148 yen per dollar range. This strategy mirrors a similar move undertaken in September 2022, where both the Japanese government and the BOJ intervened by purchasing yen at a rate of 145 yen per dollar. Should the Japanese authorities abstain from intervening, experts anticipate a resurgence of interest in short selling the yen.

Eisuke Sakakibara, widely known as “Mr. Yen,” and a former Japanese finance minister, has weighed in on the situation. Sakakibara previously predicted a potential fall in the yen from its three-decade low last year. This forecast is based on the divergence between the monetary policies of the Bank of Japan and the Federal Reserve (Fed).

Sakakibara, who held significant influence over the yen during his tenure as Japan’s finance minister from 1997 to 1999, suggests that the yen could plummet by more than 10 percent from its current levels. This projection stems from the BOJ’s commitment to maintaining an ultra-easy monetary policy, while the Federal Reserve opts for multiple interest rate hikes to counteract inflation.

He goes on to predict that the yen might breach the 160 yen per dollar mark, potentially occurring next year. Such an occurrence could trigger intervention by Japanese authorities to prop up the yen’s value. Presently, Sakakibara serves as the President of the Institute for Indian Economic Studies.

In conclusion, the recent weakening of the yen below 145 yen per dollar has sparked discussions about possible intervention by the Japanese government. This event highlights the delicate balance between contrasting monetary policies pursued by the Bank of Japan and the Federal Reserve. As experts and former financial officials predict future scenarios, the foreign exchange market remains in a state of anticipation, closely watching for any government-led measures to stabilize the yen’s value.

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