Japan warns against weak yen, stands ready to intervene

TOKYO – Japan’s top currency diplomat Atsushi Mimura said on Sept 4 that he remained on alert to exchange rate moves, maintaining a warning on Tokyo’s readiness to intervene in the market to combat excessive yen declines.

The remark came despite the yen’s 2 per cent jump against the US dollar on Sept 3, as investors continued to price in the chance of interest rate hikes by the Bank of Japan (BOJ).

“There’s no change to our stance of being on alert to currency moves,” Mimura told reporters.

“We remain in constant contact with US authorities” after the Group of 20 finance leaders’ gathering in Asheville, North Carolina, that concluded on Sept 1, he said.

The US dollar fell to 155.305 yen after Mimura’s comments, as market participants weighed the chance of another yen-buying intervention by the authorities.

But the yen soon gave up its gains and fell to 156.43 per US dollar later in Asia, underscoring the currency’s persistent downtrend driven in part by still wide US-Japan rate differentials.

Markets have nearly fully priced in the chance of a BOJ rate hike in September after a series of hawkish BOJ communications and comments from US Treasury Secretary Scott Bessent urging the Japanese central bank to raise rates.

Bessent said he told BOJ Governor Kazuo Ueda in talks on the sidelines of the G-20 gathering that he strongly supported “decisive” monetary steps to address the yen’s undervaluation – remarks that some analysts saw as infringing upon the BOJ’s independence.

In a news conference on Sept 4, Finance Minister Satsuki Katayama said that she had not received any demands from Bessent over Japan’s monetary policy.

“It’s been Secretary Bessent’s long-held view that the yen has been undervalued due largely to the interest rate divergence between the two countries,” Katayama said when asked about Bessent’s remarks.

A weak yen has pushed up import prices and broader inflation, causing headaches for Japanese policymakers.

Japan and the US carried out a rare joint yen-buying intervention on July 31, signalling their determination to prevent a sell-off in the yen and Japanese government bonds from spilling over into global markets.

While that action failed to put a sustained floor under the yen, Bessent told Reuters that he did not see recent yen moves as disorderly, suggesting that Washington was not prepared to join Tokyo for another foray into the market to prop up the currency. REUTERS