Japan's Kato Voices Concern With Yen at Weakest Since March

Mint

2 days ago

Japan's Finance Minister said he's worried by movements in the yen, which weakened to levels last seen in March following dovish messaging on interest rates from the Bank of Japan.
'The government is deeply concerned about trends in the currency market, including speculative movements,' Finance Minister Katsunobu Kato told reporters on Friday. 'It's important for exchange rates to remain stable, reflecting economic fundamentals,' he added.
Kato's comments came after the yen slid past the 150 level against the dollar on Thursday, following the BOJ's decision to leave interest rates unchanged. Governor Kazuo Ueda delivered a largely dovish message during his post-decision press conference on Thursday, cooling speculations about a near-term tightening move.
Strategists in Tokyo warned of the risk that the yen could depreciate as far as 155 to the dollar, a level that would put investors on alert for the risk of authorities stepping into the market to support the currency.
'If the BOJ is not going to raise rates, there is a possibility that the yen could fall to 155,' said Marito Ueda, general manager of market research department at SBI Liquidity Market. Then 'intervention is the only option left.'
While Kato refrained from commenting on specific FX levels, he acknowledged that he is aware of various views in the market. The yen was trading around 150.70 to the dollar as of 11:40 a.m. in Tokyo.
The yen declined about 4.5% in July, defying its seasonal trend as domestic political uncertainties and tariffs weighed on the currency. Just hours before the BOJ decision, traders also dialed back bets on rate cuts in the US by the Federal Reserve, putting further pressure on the yen.
'Ueda was still quite dovish, so I see an even greater chance of the yen weakening past the 155 level against the dollar,' said Tohru Sasaki, chief strategist at Fukuoka Financial Group. 'I also don't think that the Fed will be able to cut rates this year, and if expectations for a cut continue to recede, the dollar will be bought.'
What Bloomberg Strategists Say:
USD/JPY traders will set their sights on an intervention zone nearer to 155 than current levels, based on this week's inputs from the Fed, BOJ and yield curves.
That's implied by the old MOF rule of thumb that a swift 10-yen move should be addressed verbally, then actual yen buying if required. The shot clock is likely to have re-set with last week's dip to a 145 handle, hence the 10-yen projection.
— Mark Cranfield, MLIV Strategist. Read more on MLIV.
'Stronger US data and dollar would push up dollar-yen and if it breaks 152, the next level that the pair will aim is 155,' said Shoki Omori, chief desk strategist at Mizuho Securities Co. in Tokyo.
Separately, the finance minister said that recent trade agreements between Japan, the EU, and the US have helped reduce uncertainty surrounding trade policy and lowered the risk of it weighing on both the Japanese and global economies. The White House announced executive orders to set Japan's universal tariffs at 15% on Thursday, reflecting an earlier agreement between the two countries. The new rate will be coming into effect Aug. 7.
Still, Kato emphasized the need to continue monitoring the impact of new rates.
'The Japanese government will take all necessary measures to mitigate these tariffs impact on Japan's industries and employment,' Kato said. 'We will also thoroughly analyze the effects of tariffs on Japan, based on the series of trade deals and developments in other countries.'