EXCLUSIVE: Japan Asked Fed to Conduct Jan. Rate Check

Tokyo, Feb. 12 (Jiji Press)–A rate check by the U.S. Federal Reserve that is believed to be the factor behind the yen’s abrupt strengthening against the dollar late last month was conducted at the request of the Japanese government, informed sources told Jiji Press on Thursday. It is extremely rare for U.S. monetary authorities to carry out a rate check, in which a central bank asks major financial institutions about exchange rate levels. News about the Fed’s rate check elicited a strong response from the foreign exchange market, suggesting that Japanese and U.S. authorities effectively worked together to stem the yen’s rapid depreciation vis-a-vis the dollar. A rate check is considered a precursor for a market intervention by authorities to curb wild swings in currency rates. On Jan. 23, the dollar topped 159 yen on speculation that the Bank of Japan was cautious about raising its policy interest rate further. But the yen drew buybacks following a Fed rate check the same day, and the dollar fell below 152.50 yen through Jan. 28, according to market sources. The Fed move startled many market players, with officials at Japanese banks saying that a rate check by the U.S. central bank was “unheard of.” In a joint statement released last September, U.S. Treasury Secretary Scott Bessent and then Japanese Finance Minister Katsunobu Kato said that they would continue “close consultations” on foreign exchange matters and that “excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability.” The Japanese side is believed to have asked the Fed to carry out the January rate check based on the joint statement. At a World Economic Forum event in Davos, Switzerland, on Jan. 20, shortly before the Fed rate check, Bessent voiced concerns about upward pressure on U.S. long-term interest rates from rising long-term rates in Japan reflecting worries over the Asian nation’s fiscal health. The two countries’ authorities may have decided to act in step to quell market turmoil, sources said. END [Copyright The Jiji Press, Ltd.]