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The Japanese government is hoping that the Bank of Japan will take 'necessary' action on the currency and inflation

Image: Reuters Berita 24 English -  In view of the yen 's recent severe declines and growing cost of living, Japan's government hop...

Image: Reuters

Berita 24 English -  In view of the yen's recent severe declines and growing cost of living, Japan's government hopes the central bank would take "appropriate steps," according to Chief Cabinet Secretary Hirokazu Matsuno.

When asked about the yen's recent drop to a new 24-year low, the senior government spokeswoman reaffirmed Tokyo's willingness to intervene in the currency market if necessary.

"We hope the Bank of Japan (BOJ) continues to work closely with the government and takes suitable actions," Matsuno said at a regular press briefing.

The remark on the central bank, which is similar to his previous remarks, comes ahead of the BOJ's two-day policy meeting, which concludes on Friday.

While the Bank of Japan is widely expected to maintain its ultra-low interest rate targets, it is under fire for its dovish policy, which is pushing down the yen and raising the cost of raw materials imports.

Expectations of aggressive interest rate hikes in the United States have heightened the likelihood of widening yield differentials between the two countries, sending the yen to a new 24-year low of 135.58 per dollar on Wednesday.

If the yen continues to decline, some market participants believe the BOJ will allow long-term interest rates to increase much more in the coming months, possibly by changing its yield control strategy.

"The Bank is backed up against a wall. It's having to interfere in the bond market to keep yields down, but that simply adds to yen weakness," noted Tom Learmouth, a Japan economist at Capital Economics, in a research note this week.

"We believe the BOJ will lift the long-term interest rate ceiling from 0.25 percent to 0.50 percent in the not-too-distant future, easing pressure on JGB yields and the yen."


After spending approximately 3 trillion yen ($22.21 billion) on purchases on Tuesday to defend its 0.25 percent cap on 10-year Japanese government bonds, the BOJ offered to scale up bond buying for a variety of maturities on Wednesday.

BOJ Governor Haruhiko Kuroda has consistently emphasised the need of maintaining ultra-loose monetary policy and stated that the central bank will not use currency rates to guide monetary policy.

After Friday's joint statement with the central bank expressing "alarm" over the yen's recent drops, markets are looking for any hints on whether Japan will interfere in the currency market to prevent yen dips.

On Wednesday, a Japanese finance ministry official told Reuters, "We won't rule out currency intervention, or any other viable alternatives."

"We're looking more at whether the yen's moves are turbulent than its level," said the person, who spoke on the condition of anonymity owing to the sensitivity of the topic, adding that the government was not drawing a line in the sand on where the dollar/yen should be.

(1 dollar Equals 135.0900 yen)

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