Japan Signals Unlimited Readiness to Defend Yen
Japan’s top currency diplomat said on Thursday that Tokyo faces no restrictions on how often it can intervene in the foreign exchange market, reinforcing the government’s willingness to step in and support the weakening yen.
Atsushi Mimura, Japan’s vice finance minister for international affairs, also revealed that Japanese authorities remain in daily communication with U.S. officials regarding currency market developments.
His comments come ahead of a planned visit to Tokyo next week by U.S. Treasury Secretary Scott Bessent, who is expected to discuss yen movements and monetary policy with Japanese officials.
Japan and US Maintain Close Currency Coordination
Although Mimura declined to directly comment on Bessent’s upcoming trip, he emphasized that Japanese and U.S. authorities are in constant contact.
“Our focus, consistently and without change, is directed in all directions,” Mimura told reporters, adding that Tokyo continues to monitor speculative activity in the currency market closely.
According to a source familiar with the matter, Bessent is scheduled to meet Japanese Prime Minister Sanae Takaichi, Finance Minister Satsuki Katayama, and Bank of Japan Governor Kazuo Ueda during his three-day visit beginning Monday.
Markets Watch for US Position on Yen Intervention
Investors are now closely watching for signals from Bessent regarding the yen and the Bank of Japan’s monetary policy stance, especially after his previous remarks supporting faster interest-rate hikes in Japan.
Shota Ryu, FX strategist at Mitsubishi UFJ Morgan Stanley Securities, said markets are mainly focused on whether the United States would join Japan in currency intervention efforts.
He noted that any intervention is likely to remain unilateral for now, which would carry less impact than coordinated action between both countries.
Ryu added that U.S. officials likely believe the yen’s weakness stems more from the Bank of Japan’s slow pace of rate hikes rather than speculative trading activity. As a result, Bessent could reportedly encourage the BOJ to raise interest rates as early as June.
Japan Suspected of Multi-Billion Dollar Yen Intervention
Reuters sources said Japanese authorities likely intervened in the market last Thursday, with money market data indicating around $35 billion may have been spent to support the yen.
Since then, the currency market has experienced several sharp yen rallies, including a jump to the 155 level against the U.S. dollar on Wednesday.
However, the yen later eased slightly, trading near 156.20 per dollar during Thursday’s session.
Mimura refused to confirm whether intervention took place during Japan’s Golden Week holidays, saying only that officials remain highly attentive to currency market movements.
IMF Rules Do Not Restrict Japan’s Actions
Mimura also clarified that the International Monetary Fund’s classification of Japan as a free-floating exchange rate economy does not limit how often authorities can intervene.
His remarks responded to questions regarding IMF guidelines that typically flag countries conducting more than three interventions within six months.
Weak Yen Increases Pressure on Bank of Japan
Japan’s prolonged yen weakness has become a growing concern for policymakers, as it continues driving up import costs for energy, food, and raw materials.
Minutes from the Bank of Japan’s March meeting showed several policymakers favored an earlier interest-rate hike due to rising inflation pressures linked to the weaker currency.
Japan’s suspected intervention on April 30 came just two days after the BOJ kept interest rates unchanged while signaling a possible rate increase in June.
Analysts Warn Intervention Alone May Not Stop Yen Decline
Rinto Maruyama, FX and rates strategist at SMBC Nikko Securities, said Japanese authorities strategically intervened during thin holiday trading conditions to maximize the market impact.
He noted that officials acted shortly after verbal warnings from Finance Minister Katayama and Mimura, catching traders with large yen-short positions off guard.
Still, Maruyama warned that intervention alone may not be enough to reverse the broader weak-yen trend.
“While 158 is now viewed as the authorities’ new line in the sand, the yen continues slipping back even after approaching 155,” he said, suggesting deeper monetary policy changes may ultimately be needed.
