Yellen sees yen’s depreciation, says intervention only warranted in ‘rare’ cases

U.S. Treasury Secretary Janet Yellen on Tuesday acknowledged the Japanese yen’s substantial depreciation in recent weeks, but said the U.S. view remained that currency intervention was warranted only in “rare and exceptional circumstances.”

Yellen told reporters after separate meetings with Japanese Finance Minister Shunichi Suzuki and Bank of Japan Governor Haruhiko Kuroda that they had reviewed the yen’s depreciation, but did not discuss intervention or related policy.

Yellen and Suzuki pledged in a joint statement after their more than hour-long discussion to continue to consult closely on foreign exchange markets and “cooperate as appropriate” on currency issues, in line with their commitments as part of the Group of Seven and Group of 20 economies.

The dollar slid against the yen to stand around 136.89 on Tuesday, after touching a fresh 24-year high of 137.75 on Monday.

Suzuki told reporters that he shared with Yellen Japan’s concerns about the yen’s sharp weakening and she listened earnestly.

Yellen told reporters that Washington remained convinced that countries such as Japan, the United States and other members of the Group of Seven rich nations should have market-determined exchange rates and intervention was warranted “only in rare and exceptional circumstances.”

Yellen said she reiterated that position during her meetings with the Japanese officials, and that G7, G20 commitments involved “communicating closely about exchange rate developments.”

Asked if the yen’s depreciation was due to Russia’s war in Ukraine and its fallout on the global economy, or more due to macroeconomic factors, Yellen noted that Japan continued to have “yield curve control and zero interest rate policy” at a time when the Federal Reserve was tightening monetary policy.

As a result, interest rate differentials – which tended to systematically strengthen the dollar and weaken other currencies – had become “quite large,” she said, although the yen’s losses had outstripped what one might expect based on the gap.

There was, she noted, “speculation in the market” as well.