The Bank of Japan said it was sticking to its ultra-easy monetary policy after the US Federal Reserve announced a third consecutive major rate hike, sending the yen to a new 24-year low.
After the Fed’s announcement, the yen fell to 145.36 against the US dollar, but recovered to ¥143.55 in three minutes.
The move fueled speculation that Japanese authorities had intervened, but a senior finance ministry official denied any intervention, according to local media.
The BoJ held the overnight interest rate at minus 0.1 percent on Thursday. It said it would make daily purchases of 10-year bonds at a 0.25 percent yield.
The BoJ’s decision has exacerbated a global divergence in yields after the Fed hiked 0.75 percentage points on Wednesday and said it would keep policy tight in its fight against inflation.
The sudden reversal of the yen raised the question of whether Japan had stepped in to strengthen the yen for the first time in more than two decades. Currency analysts had argued this week that intervention became increasingly likely as the yen tested new lows.
Japan’s core consumer prices, excluding volatile food prices, reached 2.8 percent in August, rising at the fastest pace in nearly eight years on the back of rising commodity prices and the weaker yen.
But the BoJ has long argued that underlying demand in the Japanese economy remains weak and that its monetary policy is not focused on the exchange rate.
“Extremely high uncertainties remain for the Japanese economy, including the course of Covid-19 at home and abroad and its impact, developments in the situation around Ukraine and developments in commodity prices and in overseas economic activity and prices,” the central office said. Bank.
Benjamin Shatil, currency strategist at JPMorgan in Tokyo, said: “The lack of any indication of a signal shift . . . that policy adjusting to higher price pressures leaves the door open for further yen downwards.”
The BoJ ended a scheme to offer low-cost loans to banks financing small and medium-sized businesses to survive the Covid disruption, but unexpectedly expanded other parts of its pandemic-related financing program.
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“In this situation, it is necessary to pay due attention to developments in the financial and foreign exchange markets and their impact on Japan’s economic activity and prices,” it added.
The policy meeting came after BoJ officials called currency traders last week to inquire about market conditions in a so-called interest rate review, illustrating the government’s alarm about the yen’s sharp decline against the US dollar.
Such controls in the past preceded an intervention by the Ministry of Finance to control the exchange rate.