On Tuesday, Bank of Japan Governor Kazuo Ueda stated that he had discussions on economic development with Prime Minister Fumio Kishida but recent currency exchange rate fluctuations were not discussed.
The talks were held after the U.S. dollar rose above 145 yen. In September 2022, the rise of the U.S. dollar to above 145 yen prompted Japan to buy yen for the first time since 1998.
Although the news of the talks caused minor fluctuations in the dollar-to-yen exchange rate, when asked if they discussed recent exchange rate fluctuations, Ueda said nothing specific was discussed. He explained to Kishida the Bank of Japan's decision last month to relax yield curve control (YCC). This meeting continues the practice of his predecessor, Haruhiko Kuroda, consulting with the Prime Minister every few months on economic and financial developments.
This meeting was Ueda's second since becoming the Governor of the Bank of Japan in April. In their last meeting, they discussed "the need to guide policies flexibly due to economic outlook uncertainties," among other topics.
Last month, the Bank of Japan adjusted its yield curve control (YCC), increasing the volatility range for long-term government bond yields. This triggered financial market expectations that the Bank of Japan might reverse its decades-long loose monetary policy, significantly affecting the yields of Japanese government bonds of all maturities, the yen exchange rate, and global financial markets.
Just a week ago, Japan's Finance Minister Shunichi Suzuki warned that the government would closely monitor excessive fluctuations in the yen exchange rate. Last Thursday, a surge in U.S. Treasury yields pushed the dollar-to-yen exchange rate to its highest point since June of this year, sparking financial market speculation about the Japanese government potentially intervening in the exchange rate again. However, comments made after Ueda's meeting with the Prime Minister dispelled market concerns about the Japanese government's recent intervention in the exchange rate.
