Forex fluctuations are excessively rapid, says Japan’s Mimura

The pace of currency movements was highlighted by Japan's top currency diplomat Atsushi Mimura on Wednesday, when he said recent moves, including those over the past few days, are too rapid.

What did Mimura say?

Forex fluctuations are too rapid.

Recent moves are too rapid.

How has the Yen responded?

The Japanese Yen (JPY) has shown no significant response to the comments by Japan's Mimura.

Japanese Yen: frequently asked questions

Which factors shape the Japanese Yen's value?

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

Why do Bank of Japan decisions matter for the Japanese Yen?

Currency control is among the Bank of Japan's mandates, making its actions an important influence on the Yen. Direct intervention in foreign exchange markets has occasionally been used by the BoJ, usually to weaken the Yen. However, political concerns among Japan's main trading partners discourage frequent intervention. Between 2013 and 2024, the BoJ's ultra-loose monetary policy weakened the Yen against its major currency peers as the policy gap between the Bank of Japan and other leading central banks grew. A gradual reversal of that ultra-loose stance has more recently offered the Yen some support.

Why does the US-Japan bond yield gap matter for the Japanese Yen?

By maintaining ultra-loose monetary policy over the last decade, the BoJ diverged increasingly from other central banks, especially the US Federal Reserve. The resulting widening in the yield gap between 10-year US and Japanese bonds favoured the US Dollar over the Japanese Yen. That gap is now narrowing as the BoJ's 2024 decision to move gradually away from ultra-loose policy combines with interest-rate cuts by other major central banks.

Why does the Japanese Yen respond to changes in risk sentiment?

Investors often regard the Japanese Yen as a safe-haven asset, making them more inclined to place funds in the currency during periods of market stress because of its perceived reliability and stability. Such turbulent periods are therefore likely to lift the Yen against currencies considered riskier investments.

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