The yen surged to an 18-month high of mid-105 yen against the U.S. dollar in overseas currency markets on May 3.
The Japanese government and the Bank of Japan (BOJ) have repeatedly threatened to intervene in the markets. While the number of market players in Japan has lessened during the “Golden Week” holiday period, however, the buying of yen with dollars has continued, primarily driven by investors in overseas markets. A market participant says, “The focus is whether the yen’s appreciation will stop at a psychological threshold of 105-yen levels against the dollar.” But some market players suggested that once the yen surges past 105 yen versus the dollar, it could rise toward 100 yen to the dollar all at once. Therefore, the Japanese government and the BOJ could be hard-pressed to stem the yen’s rises.
The government and the BOJ are bolstering fears that the yen’s rapid appreciation and a sharp decline in share prices could adversely affect business performances of exporters and cool the economy. Prime Minister Shinzo Abe visited France and held talks with French President Francois Hollande on the evening of May 2 (the wee hours of May 3 Japan time), and regarding the yen’s recent rise, the two leaders confirmed rapid fluctuations of exchange rates were “undesirable.”