Japan’s Top FX Diplomat Notifies of ‘One-Sided, Sharp’ Yen Moves; Government Prepared to Take Action

The vice minister of finance for international affairs in Japan, Masato Kanda, recently expressed concerns about recent “one-sided, sharp” movements in the yen. He emphasized that authorities were prepared to respond to these movements and warned against speculative trading that could affect the currency’s value. Kanda’s remarks come in the wake of the yen’s significant decline, triggered by a policy change by the Bank of Japan (BOJ).

The Japanese government has been closely monitoring the depreciation of the yen, as it raises import prices and living costs for households. Market participants have been anticipating potential yen-buying intervention by Japanese authorities to counteract the sustained depreciation. The yen faced renewed selling pressure after the BOJ’s adjustment to its yield control policy was deemed insufficient to address the longstanding interest rate differentials that have been weighing on the currency for years.

Kanda highlighted the role of speculative trading as a primary driver of recent currency fluctuations. He stated that the situation surrounding yen movements has become “more tense.” In response, authorities are prepared to take appropriate action and are not ruling out any options. While Kanda did not elaborate on the specific measures or timing, the government is on standby for potential intervention. Chief Cabinet Secretary Hirokazu Matsuno echoed these sentiments, stressing that authorities are ready to act against excessive yen movements.

The strong tone of these warnings indicates a heightened sense of urgency compared to previous remarks by Finance Minister Shunichi Suzuki. The yen depreciated to its lowest level in a year against the US dollar and touched a 15-year low against the euro following the BOJ’s policy decision, which fell short of market expectations for a more significant policy shift.

After Kanda’s warnings, the yen experienced a minor rebound, rising 0.27% against the dollar. However, it remains close to its one-year lows reached the day before. The Japanese government previously intervened in the market in September of the previous year, and again in October 2022, following drastic declines in the yen’s value.

Overall, the Japanese government is closely monitoring yen movements and ready to take action to mitigate excessive depreciation. The impact of speculative trading on currency fluctuations is a key concern for authorities, who are prepared to intervene and stabilize the yen’s value. These developments have heightened market attention and expectations regarding potential government intervention in the yen market.

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