Japan appoints new top currency diplomat amid yen crisis
Japan has appointed Atsushi Mimura as the top currency diplomat. This move is due to the yen's ongoing and drastic weakening. The Japanese currency has reached its lowest level in 38 years, prompting the authorities to consider intervention in the currency market.
On Friday, 28 June 2024, the Japanese government announced the appointment of the chief currency diplomat. This decision coincided with the dramatic weakening of the yen, which reached its lowest rate against the US dollar in 38 years. On Friday, 28 June, the yen reached a rate of 161.27 per dollar, its weakest position since 1986.
The yen weakens. Possible intervention
Atsushi Mimura, a specialist in financial regulations, will replace Masato Kanda. It is worth noting that Kanda initiated the largest yen-buying intervention this year and actively countered speculators aiming to weaken the Japanese currency excessively. Therefore, the change in position intensifies speculation regarding potential Tokyo intervention in the currency market.
The weakening yen has severe consequences for the Japanese economy. On one hand, it benefits exporters; on the other, it creates political problems. A weaker national currency translates to higher import costs, intensifies inflationary pressure, and negatively impacts household budgets.
During a Friday press conference, Finance Minister Shunichi Suzuki expressed the government's official position. He emphasised that "excessive volatility in the currency market is undesirable" and assured the authorities would "respond appropriately" to such movements. Suzuki added that the government is "deeply concerned" about the impact of "rapid and one-sided" changes in the yen's rate on the country's economy.
The pressure on Japanese authorities to curb rapid declines in the yen increases as investors focus on the interest rate disparity between Japan and the United States. This situation presents Japanese policymakers with a difficult challenge—they must balance supporting exporters and protecting households from rising living costs.
Pressure on the yen may persist
Market experts predict that Japanese authorities' next intervention threshold may be around 164.50 yen per dollar. Daisaku Ueno, the chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities, suggests that "if the authorities want to prevent the yen from breaching that threshold, they will probably step in before the currency hits that level."
The situation of the Japanese currency remains closely tied to the global macroeconomic environment. Discrepancies in monetary policy between the Bank of Japan and other major central banks, particularly the US Federal Reserve, continue to exert pressure on the yen. As global interest rates remain elevated while the Bank of Japan maintains an ultra-loose monetary policy, the pressure on the yen to weaken may persist.
