Summary
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USD/JPY has fallen below 156.50 as the yen extended recent gains.
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Atsushi Mimura expressed deep concern about “one-sided, sudden” FX moves in comments Monday.
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Mimura flagged readiness to act against excessive volatility.
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Finance Minister Katayama emphasised Tokyo’s “free hand” to counter speculative swings in comments later on Monday.
The Japanese yen continued to strengthen on Tuesday, with the USD/JPY pair sliding below the 156.50 mark, as officials in Tokyo stepped up warnings about “one-sided” and “sharp” currency moves and signalled a readiness to act if volatility becomes excessive.
Top currency diplomat Atsushi Mimura voiced “deep concern” on Monday about recent yen fluctuations, describing recent moves as sudden and speculative in nature, language that markets interpreted as a possible prelude to direct FX intervention. Mimura said authorities are prepared to take “appropriate actions against excessive moves,” a phrase that traders widely view as hinting at intervention should the yen’s advance become disorderly.
The yen’s bounce this week comes as the Bank of Japan continued normalising policy last week, raising its policy rate to 0.75%, a three-decade high, and narrowing the rate differential with the Federal Reserve. In the aftermath of the Friday BoJ decision markets focused on BOJ Governor Kazuo Ueda’s cautious forward guidance, which lacked clear hints of an imminent further tightening sequence, leaving JPY vulnerable.
Mimura’s rhetoric was reinforced later on Monday by Finance Minister Satsuki Katayama, who told Bloomberg that Japan has a “free hand” to address excessive yen volatility and distinguished recent moves from fundamental drivers. She said the latest swings were largely speculative, signalling that authorities are closely watching exchange-rate behaviour and will act if necessary.
The growing chorus of official warnings has come against a backdrop of broader market dynamics, safe-haven flows and intervention speculation have lent support to the yen, while traders also remain attentive to evolving Fed rate expectations and geopolitical drivers. A break below 156.20 for USD/JPY has drawn attention, with market participants viewing it as a key level that could usher in further yen strength if official warnings translate into actual market operations.
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ADDED:
Finance Minister Katayama has declined to comment on forex levels or interest rates. She did say, however, that Japan will take appropriate action and reiterated that they have a “free hand” to respond to excessive moves in JPY.
