Japanese authorities are facing renewed pressure to combat a continued yen fall driven by market expectations that the Bank of Japan will keep interest rates ultra-low, even as other central banks tighten monetary policy to curb inflation.
to stem what it considers excessive yen falls. Among them is to intervene directly in the currency market, buying large amounts of yen, usually selling dollars for the Japanese currency.
A rate check by the BOJ, a practice in which central bank officials call dealers and ask for the price of buying or selling yen, is seen by traders as a possible precursor to intervention.Authorities say they look at the speed of yen falls, rather than levels, and whether the moves are driven by speculators, in deciding whether to step in.
If the pace of yen declines accelerates and draws the ire of media and public, the chance of intervention would rise again. In either case, the finance minister issues the order to intervene, and the BOJ executes the order as the ministry's agent.While Japan holds nearly $1.3 trillion in foreign reserves, they could be substantially eroded if Tokyo repeatedly spent huge for yen.
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