Japan’s Mimura flags excessively rapid forex fluctuations

Atsushi Mimura, Japan's top currency diplomat, warned on Wednesday that currencies have been moving too rapidly recently, including over the past few days.

Selected remarks

Forex fluctuations are too rapid.

Recent moves are too rapid.

Yen shows little reaction

Following the comments from Japan's Mimura, the Japanese Yen (JPY) has shown no significant response.

Japanese Yen: Common Questions

Japanese Yen: Main Drivers

Among the world's most actively traded currencies, the Japanese Yen (JPY) broadly reflects Japan's economic performance. More specific influences include Bank of Japan policy, the gap between Japanese and US bond yields, and traders' appetite for risk, alongside other factors.

Bank of Japan Policy and the Yen

Currency control forms part of the Bank of Japan's mandate, making its actions an important influence on the Yen. Direct intervention in currency markets has occasionally been undertaken by the BoJ, usually to weaken the Yen. Political concerns among Japan's main trading partners, however, discourage frequent intervention. Between 2013 and 2024, the BoJ's ultra-loose monetary stance weakened the Yen against its major currency peers as policy increasingly diverged from that of other leading central banks. More recently, a gradual withdrawal of this ultra-loose policy has provided some support for the Yen.

Japan-US Bond Yield Gap and the Yen

By maintaining ultra-loose monetary policy over the past decade, the BoJ increasingly diverged from other central banks, notably the US Federal Reserve. The resulting widening in the yield gap between 10-year US and Japanese bonds supported the US Dollar against the Japanese Yen. That gap is now narrowing as the BoJ gradually withdraws its ultra-loose policy following its 2024 decision, while other major central banks cut interest rates.

Risk Sentiment and Demand for the Yen

During periods of market stress, investors are more inclined to allocate funds to the Japanese Yen, which is widely regarded as a safe-haven investment because of its perceived reliability and stability. Such turbulence is therefore likely to lift the Yen against currencies considered riskier investments.

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