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Yen slips past ¥ 150 against the dollar to lowest level since 1990

The yen has slipped past ¥ 150 against the dollar for the first time in more than three decades as investors remain on alert for another intervention by Japanese authorities to prop up the currency.

The yen fell as much as 0.1 per cent to ¥ 150.08 per dollar on Thursday, pushing the Japanese currency to its lowest level since August 1990.

The latest decline came as the Bank of Japan said it would launch an emergency bond-buying operation, offering to purchase ¥ 250bn ($ 1.7bn) of government debt as it works to pin down yields even as long-term interest rates rise globally.

Despite a $ 20bn intervention in September, the yen has lost more than 23 per cent of its value against the dollar year-to-date because of the widening gulf between the BoJ’s ultra-loose monetary policy and tightening by most other big central banks.

Traders have speculated that authorities subtly stepped in last week to strengthen the yen, but there has been no announced intervention following the September action.

Comments from BoJ governor Haruhiko Kuroda last month that signalled that interest rates would remain low helped push the yen past the ¥ 145.90 per dollar level and prompted the first intervention by Japanese authorities since 1998.

With $ 1.2tn in foreign reserves at the end of September, Japan could carry out additional interventions, but analysts have warned that such action will not be effective in stemming the depreciation so long as the interest rate differential between Japan and the rest of the world continues to widen.

Line chart of ¥ per $ showing yen falls to lowest since 1990

“If you look at the interest rate differential between the US and Japan, the yen could be trading at ¥ 155 [per dollar] but the important thing for authorities is to slow down the pace of the depreciation so it stays around ¥ 150, ”said Kenta Tadaide, a senior foreign exchange strategist at Daiwa Securities.

He added that the government needed to buy time until early next year when the US Federal Reserve is expected to stop raising rates.

Despite a surge in imported food and energy prices, inflation in Japan has remained relatively mild compared with the US and Europe. Core inflation, excluding volatile food prices, is forecast to have reached 3 per cent in September with data due to be released on Friday, up from 2.8 per cent in August. But the BoJ has argued that the rate would ease to less than 2 per cent next year and underlying demand in the economy remained too weak for the central bank to shift to policy tightening.

In a recent interview with the Financial Times, Japan’s prime minister Fumio Kishida said the central bank needed to maintain its policy until price increases led to rising wages.

Strategists at multiple investment banks have downgraded their short-term forecasts for the yen as it has plunged. Last week, JPMorgan raised its fourth-quarter estimate for Japan’s currency to ¥ 155 against the dollar, up from ¥ 147 previously, while Goldman Sachs pushed its three-month forecast to the same level, up from ¥ 145.

On Wednesday, Naohiko Baba, Japan economist at Goldman Sachs, said he expected the BoJ to “maintain the status quo across all monetary policy parameters” at its upcoming meeting next week.

“The key here in our view is the effectiveness of intervention with the apparently conflicting policy goals”, with the BoJ still committed to ultra-loose monetary policy and Japan’s Ministry of Finance seeking to keep depreciation in check, said Baba.

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