The new Japanese government and the Bank of Japan have previously shown interest in a stronger yen in an attempt to decrease the importance of exports in hopes of increasing consumer spending, however, now they have come out and said that they may take action in markets after the yen reached an 8-month high. The new government had decided to allow the currency to float according to market participants instead of following its policies of the past of buying dollars and selling yen. Also, Japanese interest rates are no longer the lowest in the world, exposing it less to the carry trade and less selling of the yen. The combination had fueled a rally in the yen to <90.
Finance Minister Fujii, after coming into power two weeks ago, said the idea of a weaker yen helping the nation’s exporters is “absurd,” and he opposed governments stepping into currency markets “in principle.” Now he comes out with “If the currency market moves abnormally, we may take necessary steps in the national interest.” Two contradictory statements. It’s essentially importers vs. exporters.
I think long-term the yen needs to lose value. The demographics of the country are not positive. The economic fundamentals of the country are not positive. And now Fujii says they will buy dollars.