After several days of hesitation, the Japanese government intervened in the currency market on Thursday in order to weaken the yen, which was approaching its highest level against the dollar since 1945 and threatening the economic recovery following the March 11th earthquake.
Following the intervention, the dollar was gaining ground against the yen on Thursday, trading at 79.89 as of around 8:35 A.M., GMT.
The US currency is up 3.692% on the day and has reached a session high of 80.00 with a low of 76.99 so far.
“Unilateral movements strengthening the yen have recently been enacted in the foreign exchange market. If [the yen’s strengthening] continues, it could negatively affect the Japanese economy and financial stability at a time when Japan is making its utmost efforts to rebuild the country after the disaster” of March 11th, Japanese Finance Minister Yoshihiko Noda commented.
The last government intervention dates back to March 18th, but on that occasion it was a coordinated G7 action in wake of the earthquake. In September, the yen had already tumbled against the dollar, dropping from a 15-year high, after Japan intervened to sell its currency for the first time in six years.
Shortly afterward, the Bank of Japan (BoJ) announced a “reinforcement of its monetary easing plan” by increasing the amount of government bonds and other assets in order to fight against the negative effects associated with the yen’s rise.
The BOJ has also decided to keep its key lending rate unchanged in the range of 0.0% to 0.1%.