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(Bloomberg) — Recent yen weakness has done more harm than good for the Japanese economy, according to Japan’s newly appointed top foreign exchange official, who cited intervention among the measures available to counter speculation that weighs excessively on the currency.
“While the recent depreciation of the yen has both advantages and disadvantages, the demerits are becoming more noticeable,” said Atsushi Mimura, vice finance minister for international affairs in a Bloomberg interview Monday. He flagged the impact of rising energy and food prices on consumers and importers among the drawbacks of the feeble yen.
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Mimura takes up his role Wednesday, following Masato Kanda’s three-year stewardship of the nation’s currency policy. Kanda oversaw government action to support the yen for the first time in around a quarter century, as a yawning gap between US and Japanese interest rates pushed the currency down to multi-decade lows against the dollar.
He starts his position ahead of a closely watched Bank of Japan meeting that may prompt further movements in the yen. The currency has regained some ground since Tokyo’s most recent suspected intervention at the beginning of this month, with expectations for a possible interest rate hike at the meeting among the factors.
Action will be taken “if it’s really needed, after comprehensively considering it from multiple angles,” Mimura said. He referred to a Group of 20 agreement that excessive volatility and disorderly currency movements can have a negative impact on economic and financial stability. The nations reaffirmed their currency policy pledge last week when they met in Brazil.
Mimura also hinted he may continue his predecessor’s strategy of keeping investors guessing over when Japan has stepped into markets to prop up the yen.
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Japan said it spent a record ¥9.8 trillion ($63 billion) in the reporting month of May on currency intervention, about a month after two suspected moves. Since then Tokyo is believed to have stepped into the market another two times, with official disclosure of the amount spent expected later Wednesday after weeks of no comment.
“Predictability is important in some cases, while in others it makes sense to be unpredictable,” Mimura said.
Much in the way that communication “isn’t pre-set among family, friends and colleagues,” talking to the market is “something you think about in that specific situation. Ultimately that’s it,” he said.
Though primarily known as the top currency officer, Mimura’s role is also responsible for overseeing a range of international operations within the ministry. Mimura said he hopes to strengthen communication across bureaus, including the finance bureau, which is tasked with promoting the sale of the government bonds to foreign investors.
The BOJ will announce a plan to reduce its bond purchases at Wednesday’s meeting. Given that the central bank now holds more than 50% of JGBs issued, the government needs to find other buyers who could fill the gap. Last month, the ministry said foreign investors could be among the candidates.
Mimura also said international cooperation, development policies and economic security are three key issues for his role. While high-level gatherings including the Group of 20 have faced increasing difficulty in reaching agreements, Mimura said the meetings themselves still hold significance.
“International cooperation is not only about sharing ideas and getting along,” said Mimura. “It is also meaningful to get together and discuss each other’s positions, including countries with different ways of thinking, and it is very important to have a channel to share views.”
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