Newly designed Japanese 10,000-yen banknotes move through a machine at the National Printing Bureau's Tokyo plant in Tokyo, Wednesday, June 19, 2024. The yen's sustained weakness has raised concerns about a possible resurgence of cost-push inflation, possibly weighing on private consumption.
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Atsushi Mimura, a Japanese foreign exchange diplomat, said authorities were “constantly monitoring the market.” circle Carry trades have the potential to increase market volatility, he was quoted as saying in an interview on Friday by NHK.
According to NHK, Mimura said it was highly likely that the yen carry trades that had built up in the past had been almost completely unwound.
“However, if such movements increase again, market volatility could increase. We are constantly monitoring the market to prevent such an event from occurring,” Mimura said.
According to NHK, he said authorities were ready to act if there was a deviation from fundamentals that would cause the currency's movements to become extremely volatile and harm businesses and households.
Mimura became vice minister of finance in July, overseeing Japan's monetary policy, succeeding Masato Kanda.
Yen carry trades, in which investors borrow yen at low cost and invest in other currencies or assets that offer higher yields, have grown on expectations that the Bank of Japan will maintain ultra-low interest rates, helping send the yen tumbling to near its lowest level in 30 years in early July.
Partly due to the Bank of Japan's decision on July 31 to raise short-term interest rates, these transactions have largely unwound, resulting in the yen's recent strong rebound.
