Japan top currency diplomat says yen’s recent fall ‘too rapid’

Japan's top currency diplomat, Atsushi Mimura, expressed concerns on Thursday about the rapid decline of the yen. The Japanese currency has slipped towards 160 against the U.S. dollar, prompting Mimura's warning. He cautioned that it is too early to forget the joint Japan-U.S. intervention in the foreign exchange market earlier in the summer to stabilize the yen. As of Wednesday's 5 p.m. trading, the dollar was at 159 yen, still significantly higher than the 158.87-89 yen level observed earlier in the day.

Mimura's comments came amid expectations that the Federal Reserve would raise interest rates, which boosted the dollar's value, according to dealers. Mimura conveyed his impression that the rapid movements in the currency markets over recent days are concerning. Financial markets anticipate that the Bank of Japan (BOJ) will continue with further interest rate hikes as early as its next meeting in December, as inflation persists above its 2 percent target.

While the BOJ has indicated that additional rate increases may be necessary if there are signs of inflation overshooting its target, the current policy rate remains lower than that of the United States and Europe. This interest rate differential continues to exert downward pressure on the yen against the dollar. Factors contributing to the yen's weakness include high energy prices driven by heightened Middle East tensions and the weak yen, which increases import costs for Japan, a resource-scarce nation.

Japan intervened in the foreign exchange market earlier this year to support the yen, but the currency has continued to decline, partly due to market concerns over Japan's fiscal health. Prime Minister Sanae Takaichi has been advocating for increased fiscal spending to address these issues. The yen had fallen to levels not seen in about four decades, surpassing 163 per dollar, before the BOJ's interventions alongside the United States in July.