Japan's top currency diplomat, Atsushi Mimura, expressed concern Thursday over the yen's rapid decline, warning that the recent fall has been 'too rapid.' The yen slipped toward 160 against the U.S. dollar, prompting Mimura's remarks. He also cautioned that it is 'too early' to forget the joint Japan-U.S. intervention in the foreign exchange market this summer, which aimed to stem the yen's depreciation.
The dollar was trading around the mid-159 yen line after Mimura's comments, still significantly higher than 158.87-89 yen as of 5 p.m. Wednesday. The dollar's strength was fueled by expectations of a Federal Reserve interest rate hike, supported by stronger-than-expected U.S. consumer inflation data.
Financial markets anticipate that the Bank of Japan (BOJ) will raise interest rates as early as its December meeting, as inflation remains persistent. The BOJ's current policy rate of 1.25 percent is still lower than those in the United States and Europe, contributing to the yen's weakness. High energy prices and a weak yen, which inflates import costs, have further strained Japan's economy.
Japan's previous interventions in the foreign exchange market, including a joint effort with the United States on July 31, failed to reverse the yen's declining trend. Market worries about Japan's fiscal health, amid Prime Minister Sanae Takaichi's push for more fiscal spending, have also weighed on the currency.