Japan warns against weak yen, stands ready to intervene

TOKYO – Japan’s top currency official, Atsushi Mimura, warned on September 4 that Japan remains prepared to intervene in the foreign exchange market to curb excessive drops in the yen’s value. This statement followed the yen’s 2% rise against the US dollar on the previous day, as investors remain concerned about a possible interest rate increase by the Bank of Japan (BOJ).

Mimura stated that their "stance of being on alert to currency moves" remains unchanged, and they continue to maintain constant communication with US authorities following the Group of 20 finance leaders’ meeting in Asheville, North Carolina, which concluded on September 1.

Following Mimura’s remarks, the US dollar's value dropped to 155.305 yen, prompting market participants to consider the likelihood of another intervention by the authorities. However, the yen quickly lost its gains and fell to 156.43 per US dollar in Asia, highlighting the currency's ongoing decline, partly due to the significant gap between US and Japanese interest rates.

Market participants have largely priced in the possibility of a BOJ rate hike in September after a series of hawkish BOJ communications and comments from US Treasury Secretary Scott Bessent, who urged the Japanese central bank to raise rates during discussions at the G-20 gathering. Bessent’s comments, according to some analysts, may have violated the BOJ's independence.

Finance Minister Satsuki Katayama, addressing the issue in a press conference on September 4, denied receiving any requests from Bessent regarding Japan’s monetary policy. She explained that Bessent's long-held view is that the yen has been undervalued primarily due to the interest rate gap between the two countries.

A weak yen has caused import prices and overall inflation to rise, creating challenges for policymakers in Japan. Although a rare joint yen-buying intervention by Japan and the US took place on July 31, it did not provide a sustained support for the yen. Bessent told Reuters that recent movements in the yen do not appear disorderly, suggesting that Washington is not ready to join Tokyo for another intervention to bolster the currency.