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

Japan's top currency official, Atsushi Mimura, voiced concern on Thursday about the rapid decline of the Japanese yen. The currency has recently plummeted toward 160 against the U.S. dollar, sparking a warning. Mimura, who serves as vice finance minister for international affairs, also cautioned against dismissing the events of this summer, which saw a joint Japan-U.S. intervention to curb the yen's depreciation.

As of Wednesday evening, the dollar traded near 159 yen, a significant gain from the mid-158.87-89 yen level earlier in the day. The dollar's upward movement was driven by expectations of an imminent increase in the Federal Reserve's key interest rate, which was supported by robust U.S. consumer inflation data. According to dealers, Mimura appeared to regard the recent currency movements as excessively swift.

Financial markets anticipate that the Bank of Japan (BOJ) will implement another interest rate hike as soon as its next meeting in December, given the persistent inflation. Although the BOJ has hinted that further rate increases may occur if there is a risk of inflation surpassing its 2 percent target, the country's current benchmark rate of 1.25 percent remains lower than those of the U.S. and Europe.

This interest rate gap is a primary reason behind the yen's weakness against the dollar. Factors such as high energy prices resulting from heightened Middle East tensions and a weakened yen, which raises import costs, have adversely impacted resource-scarce Japan. Despite stepping in to support the yen earlier this year, the currency has continued its downward trend, partly due to market worries about Japan's fiscal health as Prime Minister Sanae Takaichi advocates for increased fiscal spending.

The yen had plummeted to levels not seen in nearly four decades beyond 163 per dollar before Japan executed a series of interventions this summer, including a joint effort with the United States on July 31.