Japan’s FX Chief Warns of Bold Action, Helps Nudge Yen Stronger

Atsushi Mimura Photographer: Shoko Takayasu/Bloomberg Photo by Shoko Takayasu /Bloomberg

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(Bloomberg) — Japan’s top currency official delivered his strongest warning yet to speculators after the yen crossed a key threshold, saying authorities may need to take bold action in the foreign exchange market if current conditions persist. 

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“We’re hearing increasing concern that speculative activity is picking up not just in the crude oil futures market, but also in the foreign exchange market,” Atsushi Mimura, vice finance minister for international affairs told reporters Monday. “If this situation continues, we believe decisive action may soon be necessary,” he said.

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Mimura spoke after the currency slid past the 160 per dollar level at the end of last week, its weakest level since Japan intervened in the market in July 2024. Following Mimura’s remarks, the yen strengthened to touch 159.85 after weakening as far as 160.46 earlier in the morning.

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“We are prepared to respond on all fronts, and our focus is broad and comprehensive,” he said, suggesting the government is monitoring not only currency markets but also crude oil futures. Last week the government hinted that it might step into the oil market in an indirect bid to support the weakening yen.

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Remarks in parliament from Bank of Japan Governor Kazuo Ueda may also have supported the yen, as he added to the picture of concern among the nation’s top policymakers.

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Finance Minister Satsuki Katayama has already referred to possible “bold action” — a phrase widely understood as signaling intervention — several times since late last year. But Mimura has not used the term since taking office in July 2024. When the expression is delivered by Japan’s FX chief, it can be seen as a final warning ahead of actual intervention to support the yen.

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The jawboning from Tokyo follows four consecutive days of declines last week that culminated in heightened volatility on Friday. The fallout from the Iran war has also hurt Japanese government bonds, pushing yields sharply higher and increasing the government’s borrowing costs.

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The yen has come under pressure as expectations grow that the Middle East conflict will drag on. The dollar has strengthened broadly this month, supported by haven demand and reduced expectations for Federal Reserve rate cuts as the surge in energy prices fuels inflation concerns.

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In his comments on the yen, Ueda said that currency movements have a big impact on the economy and prices, in response to a question in parliament. He added that the central bank was watching currency movements closely.

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“We intend to make policy decisions while carefully considering the implications of the various current financial and economic conditions and the factors driving them, including exchange rate trends,” he said.

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Since late 2022, Japan’s authorities have spent more than ¥24 trillion ($150 billion) intervening in the currency market to prop up the yen. The most recent round of operations came in July 2024, after the currency weakened past the 160 per dollar level. That followed Japan’s largest ever intervention to support the yen earlier in the year in April and May.

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Separately, Katayama is set to meet Group of Seven finance and energy ministers on Monday, where she may discuss the matter with counterparts. She said last week that global policymakers are becoming increasingly concerned about recent market moves.

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Any decision to step into markets would be made by the Finance Ministry. The BOJ would then help carry out the move as instructed by the ministry.

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—With assistance from Toru Fujioka, Brett Miller and Brian Fowler.

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