Japan’s Chief of Finance shared his thoughts about Japan’s stance on the volatile forex market. During this statement, he made it very clear that Japan would adapt to the situation accordingly but will not be making any preemptive decisions. However, many things have happened since Suzuki made his remarks public.
Since then, the forex market has changed considerably, and various factors currently exist that should make the Japanese Ministry of Finance reconsider its current position. Furthermore, Japanese officials have also made it clear that the country needs to focus its efforts more on domestic production to ease its reliance on imports.
By focusing its efforts on improving its domestic products, japan will not have to rely on its foreign reserves to support the currency. But despite the many changes that have occurred in the market since the Finance Minister’s initial comments, They have yet to make any major changes.
Changes to the Market
The last time that the finance chief talked about the volatility of the forex market, Japan had to have recently made an intervention to sustain the price of its currency. It was the first intervention that the country had made in over two decades.
He spoke at length about how japan is looking into alternative ways that it can improve its currency without having to rely on the foreign reserve. He also admitted to just how volatile the market is right now and the many changes that will be necessary to address it.
Furthermore, since his visit to Washington, the US dollar reached a 32-year high, which required another intervention. This major development meant that people had a lot of questions to ask the chief minister about how he planned to deal with this specific situation.
No Further Thoughts
The chief minister of finance has a lot of responsibility on his shoulders, but he proceeded to reiterate his original thoughts. Throughout the days that he was in Washington and the incident where the dollar reached an all-time high against the yen, he repeated his original thoughts on the matter.
He said that Japan would act when necessary or when it felt the volatility in the currency market was becoming too much to handle. However, the fact that the chief finance minister did not specify what that plan was did not incite much confidence.
Low Rates Vs. High Rates
The greatest discrepancy that came as a result of the dollar’s constant increase was that the Federal Reserve had adopted very heavy interest rate hikes. In contrast, Japan had implemented very small interest rate hikes. If the dollar continues to rise against the yen, then it is likely that Japan will continue to rely on its foreign currency reserve.