A Japanese finance official again warned that the message of a trend toward yen depreciation against the dollar should be taken at face value. He said the market would be closely monitored as pressure for yen depreciation continues even after coordinated intervention by Japan and the United States.
Mimura Atsushi (三村淳), Japan’s Vice Minister of Finance for International Affairs, said in an interview with Reuters that the signals concerning yen depreciation sent by Japan’s prime minister and finance minister, along with the US side, were “extremely clear,” and reiterated that the market should take the message at face value. In the New York market immediately after his comments, the dollar briefly rose above the ¥157 level against the yen before falling to around ¥156.75, but it rose again to ¥157.48 in the Tokyo market.
The comments came as pressure for yen depreciation persisted after Japan and the United States intervened to buy yen on 31 July, when the yen was at its weakest level in approximately 40 years. According to Ministry of Finance data, approximately ¥27.13 trillion was deployed in the interventions. The first intervention was conducted from the end of April to early May, with ¥628.0 billion deployed on 30 April, ¥78.02 billion on 4 May and ¥468.0 billion on 6 May. The yen fell temporarily after the intervention, but had recovered its level by the end of May.
The second intervention was conducted at the end of July, with ¥15.4 trillion deployed between 30 July and 26 August, the largest amount ever on a single-month basis. The yen plunged from around ¥164 to ¥155.21 immediately after the intervention, but approached ¥160 again in early September.
Following meetings between the Japanese and US leaders and finance ministers, Vice Minister Mimura indicated that concerns over yen depreciation were shared and suggested that the closeness of Japan-US relations may have led to the coordinated intervention. He cited the Bank of Japan’s rate-hike policy and the Federal Reserve’s stance as factors behind the interest-rate differential, explaining that the gap between Japanese and US policy rates was affecting pressure on the yen.
Regarding the market outlook, he said views differed on the timing of additional Bank of Japan rate hikes, while there had been no criticism of excessive fiscal-policy easing. Analyses by OCBC and others indicate that the yen is undervalued, while suggesting that the possibility of the Bank of Japan turning hawkish ahead of the Federal Reserve is limited.