By Makiko Yamazaki and Leika Kihara
TOKYO, Jan 29 (Reuters) – Japan’s top monetary officials are leveraging rare U.S. backing in their fight against the weak yen, using tactical silence and calibrated communication to drive the currency sharply higher without resorting to large-scale intervention.
At the heart of the approach is Atsushi Mimura, Japan’s top currency diplomat, whose sparse public remarks have become policy signals in their own right.
Rather than offering frequent colour on the currency, Mimura has kept changes in tone deliberate, according to sources familiar with his thinking, a communications style that has most recently kept speculators guessing about when, or whether, Tokyo might step in.
“They’ve pushed dollar/yen down by roughly seven yen while preserving their firepower,” said Shota Ryu, FX strategist at Mitsubishi UFJ Morgan Stanley Securities. ”It’s a remarkably efficient approach.”
The yen’s spikes occurred on three occasions since late last week, with the sharpest moves following reports of an unusual rate check by the New York Federal Reserve that put investors on alert for the first joint U.S.–Japan intervention in 15 years.
While U.S. Treasury Secretary Scott Bessent denied that the U.S. was intervening in currency markets to support the yen, former Japanese monetary officials said U.S. participation in rate checks is a major breakthrough for Japan, given Washington has traditionally viewed currency intervention negatively.
Its involvement, even at the level of rate checks, has strengthened the perception that the two governments are aligned in catching the yen’s declines, they said.
Tokyo has stayed deliberately quiet on the day-to-day market swings, repeating only that it is in close coordination with U.S. authorities.
“By keeping silent, they make the market think they must be doing something behind the scenes. Their silence is fuelling speculation and heightening uncertainty,” said Yuji Saito, executive advisor to SBI FX Trade.
Mimura, who became 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 intentional.
“Being always vocal is one style of communication, but not speaking may also be another way,” he told Reuters when he started the current post, which oversees Japan’s currency policy and coordinates economic policy with other countries.
That approach can be powerful precisely because it does not require money for costly currency interventions. Bank of Japan money market data shows no clear signs of Japan having conducted interventions since Friday’s yen rally, at least not at the scale of operations in 2022 and 2024, when Japan spent 24.5 trillion yen ($160.19 billion) in total.
Conducting yen-buying interventions means tapping Japan’s $1.37 trillion foreign currency reserves, most of which are held in U.S. Treasuries, raising the risks of adding unwanted pressure to U.S. bond markets when yields are jumpy.
Still, the strategy has limits. Durable gains for the yen ultimately depend on fundamentals, notably the BOJ’s policy path and Japan’s fiscal trajectory under the new administration after the February elections.
The BOJ’s decision to raise interest rates to a 30-year high of 0.75% in December failed to arrest the yen’s slide. While its upgrade in inflation forecasts and hawkish comments from the governor in January pushed up bond yields, the yen accelerated declines as they failed to alter perceptions the BOJ was behind the curve in addressing inflation.
Bessent, who is in close contact with BOJ Governor Kazuo Ueda, has repeatedly signalled that swifter Japanese rate hikes would be key in reversing the yen’s downtrend.
While minutes of the BOJ’s December meeting highlight a hawkish-leaning board, Ueda has been quiet on the timing and degree of further rate hikes.
A strong victory by Prime Minister Sanae Takaichi in the February 8 general election could embolden her reflationist advisers, escalating their opposition to rate hikes, some analysts say.
“Given the need to pay heed to political developments, it’s unlikely the BOJ will raise interest rates at a rapid pace. Even if it does hike rates at a pace of twice a year as markets predict, the impact on the yen would be limited,” said former BOJ official Atsushi Takeuchi.
($1 = 152.9400 yen)
(Reporting by Makiko Yamazaki and Leika Kihara; Editing by Sam Holmes)
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