Japan warns markets not to forget intervention as yen nears 160 per dollar

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Japan's top currency diplomat warned on Thursday that it is too early for markets to forget this summer's yen-buying intervention, as the yen slid back toward the key 160-per-dollar level. Atsushi Mimura, the vice finance minister for international affairs, said recent currency moves had been excessively rapid, in his first remarks on foreign exchange since late September. The dollar rose to 159.94 yen early on Thursday, its strongest in more than two months.

Mimura was pointing back to the interventions of late July through early August, when Japan bought yen to support the currency, including one operation conducted jointly with the United States. The 160 level matters because it preceded two rounds of intervention this year, and traders treat a break above it as the point where Tokyo may step in again. The dollar's latest push was fuelled by hotter-than-expected US inflation data and hawkish remarks from Federal Reserve policymakers, which lifted expectations that the Fed will raise interest rates in December and took the 10-year US Treasury yield close to 5 percent.

The weak yen is already feeding through to prices at home. Japan's yen-based import price index jumped 24.8 percent in October from a year earlier, and wholesale prices rose 7.1 percent, data showed on Thursday. For a government that depends on imported energy and food, that is the uncomfortable side of a cheap currency, and it is why the finance ministry watches the exchange rate as closely as the Bank of Japan watches inflation.

Nothing has been decided. No intervention has been announced, and Mimura's words were a warning rather than a promise of action. Analysts at Mizuho Securities said in a report that if the dollar broke above 160 and the weaker yen fuelled inflation, increasing the risk of a decline in support for Prime Minister Sanae Takaichi's government, Tokyo could carry out a unilateral intervention — but that is their assessment, not a statement from the ministry. A Bank of Japan board member, Toichiro Asada, was due to speak later on Thursday, and the central bank's December meeting is the next date traders are watching.

The stakes are political as well as economic. A yen that keeps sliding raises the cost of living just as the Takaichi government is trying to hold public support, and every approach to 160 revives the question of whether Tokyo will spend reserves to defend a line it has already defended twice this year. Mimura's message was that the market should not assume it will not.