Exclusive-Japan’s currency diplomat Mimura urges markets to heed ’very clear’ warning on yen

Japan's top currency diplomat Atsushi Mimura urged global markets to take at face value the clear signals from Tokyo and Washington regarding the yen's weakness. US President Donald Trump raised concerns about the currency's strength during a summit with Japanese Prime Minister Sanae Takaichi, and Finance Minister Satsuki Katayama revealed detailed discussions on currencies.

Mimura emphasized in a Reuters interview that he would monitor whether markets continue to accept the message. While he did not comment on potential future intervention, Mimura expressed dissatisfaction with the yen's recent movements, indicating Tokyo's continued vigilance against renewed declines. Katayama and US Treasury Secretary Scott Bessent reaffirmed their concerns over the yen's undervaluation in phone talks.

Mimura dismissed the notion that funding constraints could hinder Japan's ability to intervene, stating he had no such concerns. The yen surged against the dollar after Mimura's remarks, breaching the 157 mark to trade around 156.75. A weak yen has raised concerns for policymakers due to its impact on import costs, particularly fuel prices.

The Bank of Japan raised interest rates to a 31-year high, but the move has not effectively bolstered the currency, as market expectations of a persistent US-Japan rate gap remain. Mimura highlighted the widening gap between Japanese and US policy rates and the yen's sensitivity to these differences. He reiterated Japan's commitment to maintaining a robust relationship with the US, even beyond exchange rates, which likely facilitated the joint yen intervention in July.

Mimura dismissed concerns about Japan's fiscal policy being viewed as reflationary, emphasizing that his administration has not faced criticism from international counterparts regarding its expansionary measures.