The Yen’s Fall Driven Fundamentally, Calling Policy Change Unprecedented, says IMF

The yen’s recent fall is driven by fundamentals and there are no reason to change economic policy around it- including ultra low interest rates, according to senior International Monetary Fund (IMF).

The development underscores the difficulty Japan might fact it sought international consent on currency intervention, as G7 and G20 countries agree such action is justified only if exchange rates move out of line with fundamentals.

“What we’re seeing so far on the yen is driven by fundamentals,” Sanjaya Panth, deputy director of the IMF’s Asia and Pacific Department, told Reuters late on Wednesday.

“Economic policymaking should continue to look at fundamentals. We don’t see any reason to change economic policy because what’s happening right now reflects fundamentals.”

The yen fell two-decades low against the dollar while the Bank of Japan continuing to defend its ultra-low rate policy contrary to U.S. Federal Reserves raising rates aggressively.

“We do not see disorderly market conditions right now in the foreign exchange market. It’s been driven by fundamentals,” Panth said.

“As you know, a weak yen hasn’t been bad for Japan,” Panth said. “At the same time, it does affect households. It’s a little bit of a mixed bag,” he said in the interview.

“Japan is in a very different situation compared with other advanced countries who have begun tightening monetary policy,” he said. “We do not see any need to change the accommodative monetary policy stance.”