STRAITS TIMES



 

Japan appointed a new currency czar on June 28 as the yen plumbed a 38-year low against the US dollar, heightening expectations of imminent market intervention by Tokyo to shore up the battered currency.

Mr Atsushi Mimura, a financial regulation veteran, replaces Mr Masato Kanda, who launched the biggest yen-buying intervention on record in 2024 and aggressively pressured speculators against pushing down the Japanese currency too much.

While the change is part of a regular personnel reshuffle conducted every year, it comes as markets test Japan’s resolve to arrest a renewed fall in the yen that adds pain to households and companies by pushing up import costs.

“Kanda appeared to be someone aggressive, given his comments that the authorities were on standby to intervene any time of the day,” said Mr Hideo Kumano, chief economist at Dai-ichi Life Research Institute, adding that his departure could affect how Japan communicates its currency policy.

“But it’s hard to say until we see how his successor steers policy. All in all, I don’t think the big policy direction would change much.”

Japanese officials reiterated their warnings as the yen slid past 161 per dollar on June 28, well below levels that triggered the last bout of intervention in end-April and early May.

The yen also weakened against the Singapore dollar and was down 0.2 per cent at 118.527 per Singdollar at 2.09pm.

“Excessive volatility in the currency market is undesirable,” Finance Minister Shunichi Suzuki told a news conference on June 28, adding that the authorities would “respond appropriately” to such moves.

He also said the authorities were “deeply concerned” about the impact of the yen’s “rapid and one-sided” moves on the economy.

The Japanese authorities are facing renewed pressure to stem sharp declines in the yen as traders focus on the interest rate divergence between Japan and the US.

A weaker yen is a boon for Japanese exporters, but a headache for policymakers as it increases import costs, adds to inflationary pressures and squeezes households.

Under Mr Kanda, who was foreign exchange diplomat for three years, Tokyo spent 9.8 trillion yen (S$82.7 billion) intervening in the foreign exchange market at the end of April and early May, after the Japanese currency hit a then 34-year low of 160.245 per dollar on April 29.

The yen hit 161.27 per dollar on June 28, its weakest since 1986, ahead of crucial US inflation data due later in the day that could heighten market volatility.

Market players see the authorities’ next line in the sand as lying somewhere around 164.50.

“If the authorities want to prevent the yen from breaching that threshold, they will probably step in before the currency hits that level,” said chief foreign exchange strategist Daisaku Ueno at Mitsubishi UFJ Morgan Stanley Securities.

Mr Mimura’s appointment will take effect on July 31 after the meeting of the Group of 20 finance ministers and central bank governors in Rio de Janeiro from July 25.

Little, however, is known about his stance on currency policy.
Currently head of the Finance Ministry’s international bureau, the 57-year-old will become vice-finance minister for international affairs – a post that oversees Japan’s currency policy and coordinates economic policy with other countries.

Having spent nearly a third of his 35-year government career at Japan’s banking regulator, Mr Mimura has expertise and international ties in the area of financial regulation.

During his three-year stint at the Bank for International Settlements in Basel, Mr Mimura helped set up the Financial Stability Board in the midst of the 2008-2009 global financial crisis to reform financial regulation and supervision.

He was also part of a government team that briefed foreign investors on the 2020 revisions to foreign ownership rules to dispel the notion that the tighter rules were meant to discourage foreign investment in Japan.