Market News

(Bloomberg) -- Foreign exchange intervention by Japan to support the yen two months ago was successful, and some US authorities voiced support, the nation's top currency official said, as the yen hovers at a four-decade low.

"Judging from how the market moved afterward, I think it clearly had meaning," Atsushi Mimura, Japan's vice finance minister for international affairs, said of the action during an interview with Bloomberg Wednesday. "I'm not aware of the US ever making a single comment expressing disagreement with what we did, and if anything, there have actually been comments that were more supportive," he said.

Mimura spoke as the yen slid against the dollar to a fresh 40-year low, creating the risk of faster inflation in a country that imports the bulk of its energy and more than half its food. Mimura emphasized the frequency of his communications with counterparts in Washington, saying, "with phone calls and emails, I'm in touch with my counterpart far more frequently than most people probably imagine."

The yen was trading around 162.80 to the dollar midday Wednesday in Tokyo, near the weakest level since 1986.

The yen's persistent weakness has kept market participants wary of potential intervention after authorities stepped into the market on April 30 when Japan's currency was approaching the 161 threshold. Traders suspected further rounds of action in early May. The government said it spent a record ¥11.73 trillion ($72.3 billion) in the month through May 27 to support the currency.

The yen initially gained after that intervention, moving to around 155 per dollar, but steadily retraced those gains even after the Bank of Japan raised its benchmark interest rate on June 16 to the highest in 31 years.

While the weak yen threatens to amplify inflationary pressure, eroding households' spending power, corporate sentiment has stayed resilient, as exporters benefit directly from enhanced competitiveness and suppliers and domestic-oriented firms increasingly pass on rising costs to customers via price increases. Confidence among large manufacturers rose in June to the highest level since 2018, while sentiment at large non-manufacturers was the most optimistic since 1991, the central bank said earlier Wednesday.

Prime Minister Sanae Takaichi has sought to placate consumers by rolling out subsidies to cap fuel costs, but the strategy comes with downsides. Earlier this year, Takaichi's proposal for a costly sales tax cut helped drive up Japanese government bond yields, contributing to a broader global bond selloff.

In the interview, Mimura refrained from spelling out some of the Finance Ministry's standard currency policies, including a readiness to take bold forex action — meaning intervention — at any time. He may have done so in order to retain a degree of surprise in the event authorities decide to step into the market again.

With authorities apparently toning down their rhetoric, some market participants see an exchange rate of 164 to 165 per dollar as the next possible trigger for intervention — still some distance from the current level.