TOKYO, July 31 (Bernama-Kyodo) -- The yen briefly surged past 158 versus the US dollar late Thursday in Tokyo, prompting speculation that the Japanese government may have intervened in the market to prop up the country's currency, Kyodo News reported.
The development came as the yen had recently slid to its weakest level against the dollar in around 40 years, amid concerns that Japan’s Prime Minister Sanae Takaichi will pursue aggressive spending despite Japan's worsening fiscal health.
At 5 pm local time, the yen was trading at 163.73-74 per dollar.
The yen's surge caught many market participants off guard, coming one day after the US Federal Reserve stood pat on its key interest rate and hours before the Bank of Japan was to announce the outcome of its two-day monetary policy meeting.
"I have no clue why the yen had to be bought all of a sudden," one participant said.
"I would venture that after the Fed's decision on July 29 to maintain the current interest rate led to dollar-selling against the yen, the Japanese government may have determined this would be good timing."
Japanese authorities are believed to have last intervened in the currency market between April and May, selling the dollar in favour of the yen.
Takaichi said Thursday that Japan will cut the consumption tax rate on food and beverages to 1 per cent from the current 8 per cent, for two years starting next April, marking the first reduction since the consumption tax system was introduced in 1989.
Many market participants have expressed concern that implementing the tax cut without securing funding sources will further worsen Japan's fiscal health, already the worst among the world's major economies.
-- BERNAMA-KYODO