Japan appoints new currency diplomat amid yen's historic drop

Japan has appointed Atsushi Mimura as the top currency diplomat in response to the yen's ongoing and drastic weakening. The Japanese currency has reached its lowest level in 38 years, prompting authorities to consider intervening in the currency market.

On Friday, June 28, 2024, the Japanese government announced Mimura's appointment, coinciding with the dramatic weakening of the yen. That day, the yen reached a rate of 161.27 per dollar, its weakest position since 1986.

Atsushi Mimura, a specialist in financial regulations, will replace Masato Kanda. Notably, Kanda had initiated the largest yen-buying intervention this year and actively countered speculators aiming to weaken the currency excessively. Thus, the change in position intensifies speculation regarding possible 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 currency translates to higher import costs, intensifying inflationary pressure and negatively impacting household budgets.

During a Friday press conference, Finance Minister Shunichi Suzuki expressed the government's stance. He emphasized that "excessive volatility in the currency market is undesirable" and assured the authorities would "respond appropriately" to such movements. Suzuki added the government is "deeply concerned" about the impact of "rapid and one-sided" changes in the yen's rate on the country's economy.

Pressure on Japanese authorities to curb the rapid decline in the yen's value 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.

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.