Japan faces no limits on the frequency of its interventions in currency markets and remains in daily communication with U.S. officials, the country’s top currency diplomat said on Thursday, underscoring Tokyo’s determination to support the struggling yen.
Bessent To visit Japan
The comments by Atsushi Mimura come ahead of next week’s visit to Tokyo by U.S. Treasury Secretary Scott Bessent, bringing renewed focus on the yen, the possibility of market intervention, and the Bank of Japan’s interest rate trajectory as investors assess whether Japan can stabilise its currency independently or may require U.S. support.
Bessent is expected to discuss yen moves with his Japanese counterpart, Satsuki Katayama. Markets are on alert for any comments Bessent might make on the yen and the Bank of Japan’s monetary policy, given his past remarks favouring speedier rate hikes.
Inflation risks from the Middle East conflict exposed a hawkish divide at the BOJ last month, lifting expectations of a June rate hike despite its decision to hold policy steady, analysts say.
During a three-day visit to Japan starting Monday, Bessent will meet Prime Minister Sanae Takaichi as well as Katayama and BOJ Governor Kazuo Ueda, a source familiar with the matter said, confirming a report by Nikkei newspaper.
“The market’s biggest focus is whether the U.S. will join Japan in intervening. For now, it’s highly likely to be solo, which won’t be as powerful as joint action,” said Shota Ryu, FX strategist at Mitsubishi UFJ Morgan Stanley Securities.
“The U.S. probably feels the yen’s weakness is not due to speculative action but slow BOJ rate hikes. Bessent may thus informally call on the BOJ to raise rates in June,” he said.
In January, Bessent urged “sound” BOJ policy to curb excessive yen weakness, the same month Washington carried out rare rate checks that gave the currency a lift.
Strategy With Limits
Reuters sources said Japanese authorities intervened last Thursday, likely spending around $35 billion to support the yen. Since then, the currency has seen several sharp gains, briefly strengthening to 155 per dollar on Wednesday before easing to 156.13 on Thursday.
Atsushi Takeuchi, a former central bank official who took part in Tokyo’s market forays a decade ago, expects Japan to keep intervening in the market if the yen renews its slide below the psychologically key 160-per-dollar level.
The weakening yen is turning into a policy nightmare for authorities, ramping up the cost of imports from crude oil to food. Minutes show some BOJ board members pressed for an early rate hike at a March policy meeting, a sign of their concern about mounting inflationary pressure.
(With inputs from Reuters)
