Japanese Finance Minister Taro Aso described the yen’s recent rise as “rapid” on Friday, signalling concern that a strong currency could add further pain to an export-led economy already in recession due to the coronavirus, APA reports citing Reuters.
The yen’s recent appreciation comes just as the world’s third-largest economy has been bottoming out from its deepest postwar slump, with authorities juggling a restart of economic activity with efforts to prevent a second wave of COVID-19 infections.
The currency had been stable at around 107 yen to the dollar under Prime Minister Shinzo Abe’s cabinet, Aso told reporters after a cabinet meeting.
“In that sense, the yen has swung upward rapidly by about 3 yen recently. Stability is important, so I’m closely monitoring it with a sense of urgency.”
The dollar hit a 4 1/2-month low of 104.52 yen on Friday, having lost 3.1% this month, as investors worried that a recovery in the U.S. economy could be stymied by a second wave of coronavirus.
A Japanese government panel acknowledged on Thursday that the economy peaked in October 2018 and fell into recession, suggesting it was struggling long before its more recent coronavirus slump.
“We have taken steps to support domestic demand rather than external, helping employment and household income improve, which led to a moderate economic recovery,” Aso said.
Aso added exports account for less than 20% of Japan’s economy, shrugging off any immediate impact from the yen’s ascent, but the fact that he warned against the currency’s gains underscored authorities’ struggle to boost external demand.
Japanese authorities tend to fire warning shots against excessive currency volatility and disorderly moves at a time of market strains.
Tokyo has stayed out of the currency market since 2011 when it intervened heavily by selling the yen to prevent the strong currency from hurting an economy facing damage from a devastating earthquake, tsunami and nuclear disaster.