Japan leans in support of US, strategic silence in war on yen bears

By Makiko Yamazaki and Leeka Kihara

TOKYO, Jan 29 (Reuters) – Japan’s top monetary officials are taking advantage of rare U.S. support in their fight against a weak yen, using strategic silence and calibrated communication to keep the currency moving at a higher rate without massive intervention.

At the heart of the approach is Atsushi Mimura, Japan’s top currency diplomat, whose rare public comments have become policy signals in their own right.

Rather than providing frequent color to the currency, Mimura has made deliberate changes in tone, according to sources familiar with his thinking, a communication style that has recently kept speculators guessing as to when, or what, Tokyo might do.

“They have pushed the dollar/yen down by about seven yen while conserving their firepower,” said Shota Ryu, FX strategist at Mitsubishi UFJ Morgan Stanley Securities. “It’s a remarkably efficient approach.”

The yen’s spike has appeared three times since late last week, with the sharp moves following reports that the New York Federal Reserve warned investors of the first joint US-Japan intervention in 15 years.

While US Treasury Secretary Scott Besant has denied that the US is intervening in the currency market to support the yen, former Japanese monetary officials have said US participation in rate checks is a major success for Japan, with Washington traditionally viewing currency intervention negatively.

Its involvement, even at the level of rate checks, has reinforced the perception that the two governments are colluding to contain the yen’s decline, they said.

Tokyo has remained deliberately silent on day-to-day market swings, repeating only in close coordination with US officials.

“By remaining silent, they make the market think they are doing something behind the scenes. Their silence is fueling speculation and increasing uncertainty,” said Yuji Saito, Executive Advisor, SBI FX Trade.

Mimura, who will become vice finance minister for international affairs in 2024 after spending nearly a third of his 37-year government career at Japan’s banking regulator, has previously described his approach as deliberate.

“Being vocal is always one style of communication, but not speaking can be another,” he told Reuters as he began his current post, which oversees Japan’s currency policy and coordinates economic policy with other countries.

That approach can be powerful precisely because it doesn’t require money for expensive currency interventions. Bank of Japan money market data showed no clear signs of intervention by Japan, at least since Friday’s yen rally, in the measure of operations in 2022 and 2024, when Japan spent a total of 24.5 trillion yen ($160.19 billion).