Tokyo vows ‘appropriate action’ as yen tumbles to weakest level since 1986

TOKYO, June 30 — Japan’s finance minister said today that authorities were ready to take “appropriate action” after the yen hit a 40-year low against the dollar.

The currency has been sliding for years and has come under renewed pressure because of the Middle East war and the gap in US and Japanese interest rates.

Satsuki Katayama said Japan “will take appropriate action at any time as necessary”, local media reported.

The comment was intended to signal to markets that Japan was prepared to intervene to support the currency after spending more than US$70 billion (RM285 billion) doing so last month.

The yen sank past 161.96 per dollar in London trade yesterday for the first time since 1986.

It hit 62.40 in Asian trade today before recovering to 162.17.

A weak yen makes imports more expensive for resource-poor Japan, notably for dollar-traded oil.

Prime Minister Sanae Takaichi’s government has been shielding consumers with heavy fuel and energy subsidies.

But the weak yen has also helped fuel a boom in tourism, since it makes shopping, accommodation and food cheaper for foreign tourists.

The Bank of Japan this month raised interest rates to a 31-year high but there are expectations that the US Federal Reserve could lift borrowing costs itself this year, meaning that the gap will remain.

Further hikes by the BoJ could also meet resistance from Takaichi’s government, which is anxious not to snuff out growth with high borrowing costs. — AFP