Japan keeps US close as it signals unlimited yen defence

TOKYO - Japan faces no constraints on how often it can intervene in currency markets and is in daily contact with U.S. authorities, its top currency diplomat said on Thursday, reinforcing Tokyo's resolve to defend the embattled yen.

The remarks by Atsushi Mimura come ahead of a visit to Tokyo next week by U.S. Treasury Secretary Scott Bessent, placing the yen, possible intervention and the Bank of Japan's rate path firmly under the spotlight as investors weigh whether Tokyo can shore up its currency on its own, or will need U.S. backing to do so.

Bessent is expected to discuss yen moves with his Japanese counterpart, Satsuki Katayama. Markets are on alert for any comments Bessent might make on the yen and the Bank of Japan's monetary policy, given his past remarks favouring speedier rate hikes.

Inflation risks from the Middle East conflict exposed a hawkish divide at the BOJ last month, lifting expectations of a June rate hike despite its decision to hold policy steady,

analysts say.

Mimura, vice finance minister for international affairs, declined to comment on Bessent's visit but said he remained in daily contact with U.S. authorities, adding that his counterparts "fully understand our thinking and our actions."

"Our focus, consistently and without change, is directed in all directions," he told reporters, stressing that Tokyo continues to see speculative moves in the currency market.

During a three-day visit to Japan starting Monday, Bessent will meet Prime Minister Sanae Takaichi as well as Katayama and BOJ Governor Kazuo Ueda, a source familiar with the matter said, confirming a report by Nikkei newspaper.

"The market's biggest focus is whether the U.S. will join Japan in intervening. For now, it's highly likely to be solo, which won't be as powerful as joint action," said Shota Ryu, FX strategist at Mitsubishi UFJ Morgan Stanley Securities.

"The U.S. probably feels the yen's weakness is not due to speculative action but slow BOJ rate hikes. Bessent may thus informally call on the BOJ to raise rates in June," he said.

In January, Bessent urged "sound" BOJ policy to curb excessive yen weakness, the same month Washington carried out rare rate checks that gave the currency a lift.

STRATEGY WITH LIMITS

Sources told Reuters that authorities intervened on Thursday last week, with money market data suggesting they sold about $35 billion to support the yen. Since then, the market has seen three abrupt spikes in the yen through to Wednesday, when it jumped as high as 155.00.

In afternoon trade on Thursday, it had pared some of those gains to fetch 156.13 per dollar.

Mimura declined to say whether authorities intervened during Japan's Golden Week holidays, which ran through Wednesday, saying only that he remained closely focused on movements in the currency market.

He also said the International Monetary Fund's classification of Japan as having a free-floating exchange rate regime does not restrict how often authorities can intervene, responding to questions over IMF guidelines that flag more than three interventions in six months.

Atsushi Takeuchi, a former central bank official who took part in Tokyo's market forays a decade ago, expects Japan to keep intervening in the market if the yen renews its slide below the psychologically key 160-per-dollar level.

"Japanese authorities understand that they have no power to change the weak-yen tide around. Their goal is to stop yen falls in the hope external factors would turn in their favour," he told Reuters.

The weakening yen is turning into a policy nightmare for authorities, ramping up the cost of imports from crude oil to food. Minutes show some BOJ board members pressed for an early rate hike at a March policy meeting, a sign of their concern about mounting inflationary pressure.

Japan's suspected foray on April 30 into the currency market came two days after the central bank kept interest rates steady, while dropping strong hints of a possible June rate hike.

It also followed barely two hours after threats of action by Katayama and Mimura, an extremely tight window that magnified the impact of verbal intervention, said Rinto Maruyama, FX and rates strategist at SMBC Nikko Securities.

By striking during thin holiday trading, officials amplified the effect of their intervention and caught speculators running heavy yen-short position in what appeared to be a carefully calibrated move, Maruyama added.

However, there are limits to what intervention can achieve, he added. "While 158 is now being seen as authorities' new line in the sand, the yen keeps sliding back even after approaching 155 in a sign intervention alone can't reverse the weak-yen trend."

(Reporting by Makiko Yamazaki and Leika Kihara, additional reporting by Satoshi Sugiyama; Editing by Chang-Ran Kim and Shri Navaratnam)

Copyright Reuters or USA Today Network via Reuters Connect.

This story was originally published May 7, 2026 at 4:06 AM.