In Tokyo, Japan’s National Printing Bureau revealed newly-designed 10,000 yen banknotes at their Tokyo plant on June 19, 2024. This comes amid concerns over the persistent weakness of the yen, which has potential implications for cost-push inflation and private consumption.
Japan’s top currency diplomat, Atsushi Mimura, expressed vigilance in an interview with NHK aired on Friday. He highlighted that authorities are closely monitoring market activities, particularly the build-up of yen carry trades, which could escalate market volatility. Mimura noted that most previous yen carry trades have likely been unwound. However, he cautioned that a resurgence in such activities could disrupt market stability.
Yen carry trades, where investors borrow yen at low costs to invest in higher-yielding currencies and assets, had been a significant factor in the yen’s drop to near three-decade lows in early July. This decline was driven by expectations of ultra-low interest rates from the Bank of Japan (BOJ). However, a sharp rebound in the yen occurred following the BOJ’s decision on July 31 to raise short-term interest rates, prompting a significant unwinding of these trades.
Mimura, who succeeded Masato Kanda as vice finance minister for international affairs in July, stressed that authorities are prepared to intervene if currency movements become excessively volatile and misalign with economic fundamentals, posing risks to companies and households. His statements underscore the government’s proactive stance in safeguarding economic stability in the face of fluctuating market dynamics.
Original Story https://www.cnbc.com/2024/09/21/japan-top-currency-diplomat-says-watching-for-yen-carry-trades-report.html
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