Mimura Warns Yen Markets of Tokyo's 'Very Clear' Warning

Japan's top currency diplomat, Atsushi Mimura, has urged markets to heed the 'very clear' warning from Tokyo and Washington on yen weakness. The warning comes after US President Donald Trump raised concerns about the yen's decline during a summit with Japanese Prime Minister Sanae Takaichi.

Mimura emphasized that the message sent by Japanese and US officials should be taken at face value, signaling Japan's preparedness to respond if yen depreciation becomes disorderly. The yen strengthened sharply following Mimura's remarks, breaking through the 157-per-dollar level to trade around 156.75.

Japan and the United States conducted a coordinated intervention on July 31 to prevent the yen's decline toward a nearly four-decade low from destabilizing financial markets. While Mimura stopped short of confirming another intervention, he stated that Japan has substantial foreign-exchange reserves that can be deployed in support of the yen.

The authorities are trying to influence market expectations while monetary policy does the longer-term work. The Bank of Japan has been raising interest rates to address inflationary pressure and higher import costs created by a weak yen. However, the yen remains under pressure due to US interest rates remaining considerably higher.