On June 28, 2024, as the Japanese yen fell to a 38-year low against the US dollar, Japan appointed a new senior foreign exchange official on Friday. This move raised expectations that Japan is gearing up for potential forex interventions to support the yen.
According to Reuters, the Japanese government on Friday appointed Atsushi Mimura, the head of the International Bureau of the Japanese Ministry of Finance, as the Vice Minister of Finance, replacing Masato Kanda, who was in charge of foreign exchange affairs.
Kanda initiated the largest yen-buying intervention operation on record this year and actively urged speculators not to excessively devalue the yen exchange rate.
This personnel change comes at a time when the yen has depreciated to a 38-year low. On Friday, the yen had fallen below 161 against the US dollar, significantly lower than the levels that triggered government interventions at the end of April and early May.
While the weakening yen is good news for Japanese exporters, it poses a headache for policymakers as it increases import costs, raises inflationary pressures, and squeezes household budgets.
Hideo Kumano, Chief Economist at Dai-ichi Life Research Institute in Japan, stated, “Kanda has stated that authorities are ready to intervene at any time, which makes him appear somewhat radical… His departure could impact Japan’s monetary policy.”
He added, “It’s hard to say how his successor will shape policies until we see it. Overall, I don’t expect major changes in policy direction.”
Japanese Finance Minister Shunichi Suzuki said in a press conference on Friday, “Excessive volatility in the currency market is undesirable,” and noted that authorities are closely monitoring the rapid and one-sided fluctuations of the yen on the economy.
During Kanda’s three-year tenure overseeing Japan’s foreign exchange affairs, the government spent 9.8 trillion yen (about $608.5 billion) intervening in the forex market at the end of April and early May. On April 29, the yen hit a 34-year low, reaching 160.245 yen to the US dollar.
On Friday, the yen fell to 161.27 against the US dollar, the weakest since 1986, and upcoming US inflation data could further exacerbate volatility in the forex market.
Market analysts predict that Japan’s next intervention threshold could be around 164.50.
Daisaku Ueno, Chief FX Strategist at Mitsubishi UFJ Morgan Stanley Securities, said, “If authorities aim to prevent the yen from breaching this threshold, they are likely to intervene before the exchange rate reaches that level.”
Aged 57, Atsushi Mimura will assume his new role on July 31, overseeing Japan’s monetary policy and coordinating economic policies with other countries. However, little is known about his stance on monetary policy.
With 35 years of government service, about one-third of his career was spent in Japan’s banking regulatory authority, giving him extensive expertise in financial regulation and international connections.
During the 2008-2009 global financial crisis, Mimura helped establish the Financial Stability Council to reform financial regulation and supervision.
While at the Ministry of Finance, he was involved in amending the Japan International Cooperation Bank Act to expand the state-owned bank’s business scope and qualify foreign companies critical to Japan’s supply chain for loans.
Mimura also served on a government task force responsible for briefing foreign investors on the revised foreign ownership regulations in 2020 to dispel their concerns. Some foreign investors believed that Japan’s tightening rules were aimed at restricting investments in Japan.