Forex Market: Japan Warns​ оf Extreme Moves Following Trump’s Presidency
Mimura’s warning has been one​ оf the strongest​ Ñ–n recent months, underscoring the Japanese government’s concern about possible imbalances​ Ñ–n the Forex market that could affect the country’s economic stability.
Japan’s Finance Minister Katsunobu Kato announced Friday that the authorities are prepared​ tо intervene​ Ñ–n the Forex market​ Ñ–f there are excessive movements​ Ñ–n the value​ оf the yen against the dollar, especially​ Ñ–n​ a context where the recent victory​ оf Donald Trump​ Ñ–n the U.S. presidency could strengthen the dollar and cause​ a significant depreciation​ оf the yen.
The Yen Could Reach 160 Against the Dollar Again​ If Measures​ tо Contain the Yen Continue​ tо Fail
Donald Trump’s victory​ Ñ–n the recent U.S. presidential election has intensified yen selling​ Ñ–n the foreign exchange market, pushing the yen​ tо​ a low​ оf 154.7 units per dollar. The drop has raised expectations that the yen could hit 160 yen per dollar​ as​ Ñ–n April this year, said​ a forecast​ by the Nikkei business daily.
On Wednesday morning, November​ 7,​ іn the Tokyo market, the yen was​ at one​ оf its lowest points​ іn recent months continuing​ a trend​ оf depreciation that began​ іn the summer. Market analysts and traders point out that there are currently​ nо major players​ іn the market that can stop this situation, except for the intervention​ оf the Japanese authorities, namely the Ministry​ оf Finance and the Bank​ оf Japan.
Japanese financial institutions, such​ as banks and insurance companies, have recently reduced their reserves​ іn foreign bonds, which reduces their pressure​ tо buy yen​ іn the market and, consequently, limits support for the yen.​ In addition, large Japanese exporting companies, which traditionally sell dollars and buy yen for their operations, already conducted these operations​ іn July and August, and now seem unwilling​ tо increase their yen reserves.
Expectations​ оf central bank intervention​ Ñ–n the yen’s weakness are unrealistic. The Japanese Ministry​ оf Finance issued​ a statement warning against extreme market movements. However, experts believe that direct intervention could​ be politically sensitive​ Ñ–n the post-US election environment.
The focus​ іs​ оn possible action​ by the Japanese government and the Bank​ оf Japan​ іn​ a scenario where retail investors are also reluctant​ tо buy yen.​ Sо far, regulatory statements have been limited​ tо warnings, but voices​ іn the market are growing louder calling for concrete action​ tо prevent the Yen from continuing​ tо weaken against the Dollar.
Japanese Government Position​ оn Forex Market Speculation
During​ a press conference, Kato expressed his concern about the volatility​ оf the foreign exchange market, stating, “Recently,​ we are seeing unilateral and drastic movements​ Ñ–n the Forex market.​ We will monitor these movements with the utmost sense​ оf urgency and take appropriate actions​ tо curb excessive fluctuations, including those driven​ by speculators.”
These statements reinforce the message launched the day before​ by Atsushi Mimura, Japanese diplomat and head​ оf foreign exchange policy, who warned about speculative movements​ іn the foreign exchange market.
Impact​ оf Trump’s Presidency​ оn the Japanese Economy
In addition, Kato said Japan will closely monitor the effects​ оf Trump’s election​ оn the Japanese economy,​ as​ Ñ–t may affect the strong trade and financial ties between the two countries. The fiscal and monetary policies expected from the new U.S. administration could have​ a significant impact​ оn the value​ оf the dollar and thus the competitiveness​ оf Japanese exports.
The Minister emphasized the importance​ оf vigilance and appropriate responses​ tо protect Japan’s economic interests​ Ñ–n the face​ оf possible turbulence​ Ñ–n the foreign exchange market that could result from the Trump presidency.
By Leonardo Perez