Japan mulls intervention as US dollar crushes yen

The frenzy of the dollar has pushed one of the world’s largest economies to the brink of intervention in the foreign exchange markets.

The Bank of Japan could be the first major central bank to buy its own currency if the US dollar rises.

It has conducted an ‘interest check’ – a move seen as a likely precursor to intervention, with officials calling dealers and asking about the price of buying and selling yen.

Victoria Scholar of 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 percent against the US dollar this year, reaching its lowest level since 1998. That was the last time the Bank of Japan intervened to help its currency.

The US currency was boosted by aggressive rate hikes by the US Federal Reserve to cool inflation.

The pound has fallen 14 percent against the dollar this year, while the euro has fallen 12 percent and has reached parity.

A super strong dollar causes serious imbalances. Dollar-priced commodities, such as oil, cost more and countries with dollar-denominated debt find it more difficult to maintain them.

The Japanese currency is struggling as it has held back the rate hikes seen elsewhere, leaving the key rate at minus 0.1 percent.

Finance Minister Shunichi Suzuki said: “The recent moves have been swift and one-sided, and we are very concerned. If such moves continue, we must react without excluding options.’

The yen has hit a 24-year low of $145 a dollar — and the hint of intervention lifted it more than 1 percent yesterday.

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