Japan’s Mimura: ‘Always Prepared’ to Take Suitable FX Measures

Japan’s top currency diplomat, Masato Mimura, said on Friday that authorities are “always prepared” to take suitable measures against excessive currency moves, reaffirming Tokyo’s readiness to intervene in the foreign exchange market as the yen hovers near multi-decade lows.

What did Mimura say?

Speaking to reporters after a regular meeting of the Ministry of Finance, Vice Finance Minister for International Affairs Masato Mimura stated that the government is closely watching market developments with a high sense of urgency. He emphasized that Japan will respond appropriately to speculative and disorderly moves, without ruling out any options.

His remarks echo previous warnings from officials, but come at a time when the yen has weakened beyond 160 per dollar, a level that previously triggered intervention in 2022. As of late June 2024, the dollar-yen rate has been trading around 161, raising concerns among policymakers about the impact on import costs and households.

Why does this matter?

Japan’s currency has been under persistent pressure due to the wide interest rate differential between the U.S. and Japan. While the Bank of Japan has begun to normalize policy, it remains far from the levels seen in the U.S., keeping the yen vulnerable.

Intervention in the currency market is a significant step, as it can cost billions of dollars and may draw criticism from trading partners, particularly the U.S. However, Tokyo has repeatedly shown it is willing to act when it deems moves excessive.

Market reaction and expectations

Following Mimura’s comments, the yen saw only a marginal strengthening, as traders remain skeptical that verbal warnings alone will change the trend. Many analysts expect that actual intervention, if any, would need to be coordinated or substantial to have a lasting effect.

The Finance Ministry has not confirmed any recent intervention, but data suggests that Japan may have spent around 9.8 trillion yen (approximately $61 billion) in late April and early May 2024 to support the currency.

Conclusion

Mimura’s latest statement underscores Japan’s vigilance over the yen’s slide, but the effectiveness of such rhetoric is limited. The coming weeks will be crucial as the government balances domestic economic concerns with international expectations.

FAQs

Q1: What is the role of Japan’s top currency diplomat?
The Vice Finance Minister for International Affairs, currently Masato Mimura, oversees Japan’s exchange-rate policy and often serves as the government’s chief spokesperson on currency matters.

Q2: Has Japan actually intervened in the currency market recently?
Yes, in 2022 and again in 2024, Japan conducted yen-buying interventions. The most recent suspected intervention occurred in late April and early May 2024, though the government has not officially confirmed it.

Q3: Why is the yen so weak?
The primary driver is the interest rate gap between the U.S. Federal Reserve’s high rates and the Bank of Japan’s still-low rates, prompting investors to sell yen for higher-yielding assets.