By Makiko Yamazaki and Takaya Yamaguchi
TOKYO (Reuters) -Japan will maintain its grassroots approach to the yen, with intervention remaining an option to address excessively volatile moves in the exchange rate, the country’s new top currency diplomat Atsushi Mimura told Reuters.
“Japan will trade under internationally agreed understandings that exchange rates should be determined by markets, but excessive volatility or disorderly movements could have a negative impact on economic and financial stability,” Mimura said in an interview on Tuesday.
“It has been agreed internationally that measures, including interventions, are permitted when necessary,” he added.
The 57-year-old, previously head of the ministry’s international bureau, on Wednesday became deputy finance minister for international affairs – a post that oversees Japan’s currency policy and coordinates economic policy with other countries.
Mimura’s appointment comes as Japan’s currency shows tentative signs of recovery from a 38-year low as investors unwind their long-term bets against the currency ahead of a Bank of Japan meeting this week.
While a weak yen boosts exports, it has become a concern for policymakers by raising import costs and hurting consumption.
His predecessor, Masato Kanda, led massive bouts of yen buying intervention in this position for three years in 2022 and 2024 and was also known for aggressively warning markets about pushing the yen down.
“A change of Vice Minister of Finance for International Affairs does not mean a change in the basic policies not only on foreign exchange but also on various matters as decided by the Ministry of Finance as an institution,” Mimura said.
He declined to comment on the current market situation, saying such comments could have an unforeseen impact on the markets.
Mimura, meanwhile, hinted at a possible change in the style of communicating with the markets.
“Communicating with the markets is extremely important,” he said. “Always being vocal is one way of communicating, but not speaking can also be another way of communicating. We must avoid creating unnecessary market speculation or uncertainty, but communication can be through speaking or not speaking.”
Mimura also said the Finance Ministry will continue to work with the Bank of Japan and the financial regulator, the Financial Services Agency, as the three parties need to be on the same page on macroeconomic policies.
Mimura said it is true that the yen’s effective exchange rates have weakened due to decades of deflation. The only and natural solution is to improve Japan’s economic competitiveness and boost the country’s growth potential.
“Growth areas can be not only limited to the traditional manufacturing sector, but also to inbound tourism, pop culture, soft culture and others,” he said.
Having spent nearly a third of his 35-year government career at Japan’s banking regulator, Mimura has the expertise and international ties in financial regulation.
During his three-year stint at the Bank for International Settlements in Basel, Mimura helped set up the Financial Stability Board to reform financial regulation and supervision in the midst of the 2008-2009 global financial crisis.
