New Head of Japan's Foreign Exchange: "Yen Weakness Harms Economy More"

"Intervention in Forex Market If Necessary"
Rate Hike Gains Momentum... Nikkei "Considering 0.25%"

Atsushi Mimura, newly appointed as Japan's top foreign exchange authority and Financial Bureau Director of the Ministry of Finance, stated that the weak yen is causing more harm than good to the Japanese economy.

In an interview with Bloomberg on the 31st, Mimura said, "There are pros and cons to the recent decline in the yen's value, but the drawbacks are becoming increasingly apparent."

Atsushi Mimura, newly appointed Financial Vice Minister of Japan's Ministry of Finance [Photo by Reuters]

Mimura pointed out that one of the downsides of the weak yen is the rise in energy and food prices, which affects consumers and importers.

Mimura assumed the role of Financial Bureau Director from Masato Kanda, who oversaw Japan's foreign exchange policy for the past three years and retired.

Previously, former Director Kanda led foreign exchange market interventions in September-October 2022 and April-May this year to counter the weak yen. The Japanese foreign exchange authorities reported spending 9.8 trillion yen on the May intervention. It is estimated that there were two more interventions afterward.

Mimura stated, "After considering various factors, if it is truly necessary, we will take (intervention) measures." He also referenced the G20 agreement that excessive volatility and currency movements can negatively impact economic and financial stability. Bloomberg interpreted this as a hint that he may continue his predecessor's strategy.

The Bank of Japan (BOJ), Japan's central bank, is holding a monetary policy meeting from the previous day through today. The Nihon Keizai Shimbun (Nikkei) reported that the BOJ is seriously considering raising the short-term policy interest rate from the current 0?0.1% to 0.25%.

Some speculate that the rate hike may be postponed. The BOJ had previously indicated it would decide on the scale of government bond purchase reductions at this meeting, and it is difficult to simultaneously reduce bond purchases and raise interest rates. Additionally, the recent weakening trend of the yen has somewhat eased, reducing the urgency for a rate hike. However, the new foreign exchange chief's remarks warning against the weak yen may weaken such speculation.

At around 10:20 a.m. on the day, the dollar-yen exchange rate was moving around 152.34 yen. The dollar-yen rate had risen to the 161 yen level earlier this month but gradually declined. A falling exchange rate means a rising yen value.

The Bank of Japan will announce the results of the monetary policy meeting around noon on the day.