Japan mulls intervention as US dollar crushes yen 

The dollar’s rampage has pushed one of the world’s biggest economies to the verge of intervening in foreign exchange markets.

The Bank of Japan could be the first major central bank to start buying up its own currency as the US dollar surges. 

It has carried out a ‘rate check’ – a move seen as a likely precursor to intervention, in which officials call up dealers and ask for the price of buying and selling yen.

Victoria Scholar, at Interactive Investor, said: ‘An intervention is not unprecedented and would be the logical next step if the yen continues to fall dramatically.’

The yen has lost nearly 30 per cent against the US dollar this year to hit its lowest level since 1998. That was the last time the Bank of Japan intervened to aid its currency.

America’s currency has been boosted by aggressive interest rate hikes by the US Federal Reserve to cool inflation. 

The pound is down by 14 per cent versus the dollar this year, while the euro is off by 12 per cent, and has hit parity.

A super-strength dollar causes serious imbalances. Commodities priced in dollars, like oil, cost more and countries with dollar-denominated debt piles find it harder to service them.

Japan’s currency is suffering as it has held off from the interest rate hikes seen elsewhere, leaving its key rate at minus 0.1 per cent.

Finance minister Shunichi Suzuki said: ‘Recent moves are rapid and one-sided, and we’re very concerned. If such moves continue, we must respond without ruling out any options.’ 

The yen has hit a 24-year low of 145 per dollar – and the hint of intervention lifted it more than 1 per cent yesterday.

Michael Hewson, analyst at CMC Markets, said: ‘If they intervene now without altering their monetary policy settings, they might as well just set fire to the dollars they offload. It may slow the decline in the yen, but it won’t stop it.’