The Bank of Japan said it was sticking to its ultra-loose monetary policy after the U.S. Federal Reserve announced its third consecutive big interest rate hike, sending the yen to a new 24-year low.
After the Fed’s announcement, yen fell to ¥145.36 against the US dollar but recovered to ¥143.55 within three minutes.
The move sparked speculation that Japanese authorities were involved, but a senior finance ministry official denied involvement, local media reported.
The BoJ on Thursday, he kept overnight interest rates at minus 0.1 percent. He said he would buy daily 10-year bonds with a yield of 0.25 percent.
BOJ’s decision exacerbated global yield divergence after Fed’s The rate increased by 0.75 percentage points on Wednesday and signaled that he would pursue tougher policies to fight inflation.
The suddenness of the yen’s reversal raised questions about whether Japan had intervened to strengthen the yen for the first time in more than two decades. Currency analysts argued this week intervention was taking place is becoming increasingly likely as the yen tests new lows.
Japan’s core consumer prices, excluding volatile food prices, rose 2.8 percent in August, rising at their fastest pace in nearly eight years amid a sharp rise in commodity prices and a weaker yen.
But the Bank of Japan has long argued that underlying demand in the Japanese economy remains weak and that its monetary policy is not geared to foreign exchange rates.
“There remains very high uncertainty for the Japanese economy, including the course of Covid-19 at home and abroad and its consequences, the development of the situation around Ukraine and changes in commodity prices, economic activity and prices abroad,” the central bank said.
Benjamin Chattil, a currency strategist at JPMorgan in Tokyo, said: “The absence of any hint of a shift in the signal. . . this policy adjusts to higher price pressures, leaving the door open for further yen depreciation.”
The Bank of Japan ended a scheme to provide cheap loans to banks financing small and medium-sized companies to weather the Covid disruption, but unexpectedly expanded other parts of its pandemic-related financing program.
“In this situation, it is necessary to pay due attention to developments in the financial and currency markets and their impact on economic activity and prices in Japan,” the message added.
The political meeting took place after representatives of the Bank of Japan last week called the money changer to gauge market conditions in a so-called rate check, illustrating the government’s anxiety over the yen’s sharp decline against the US dollar.
In the past, such checks preceded the intervention of the Ministry of Finance to control the exchange rate.