TOKYO, Sept 21 (Askume) – Japan’s chief monetary diplomat Atsushi Mimura said officials are “always keeping an eye on the market” as a renewed surge in yen carry trades could increase market volatility, public broadcaster NHK reported on Friday. Zhong said.
According to NHK, Mimura said most yen arbitrage trades made in the past would be cancelled.
“But if such activity were to increase again, it could increase market volatility. We are always closely monitoring the market to ensure that this does not happen,” Mimura said.
He said authorities are prepared to take action if currency movements become excessively volatile and deviate from fundamentals, harming businesses and households, NHK reported.
In July, Mimura replaced Kanda Masato as deputy finance minister for international affairs, responsible for overseeing Japan’s monetary policy.
The yen carry trade, which involves borrowing yen at a low cost to invest in other currencies and high-yielding assets, is based on the expectation that the Bank of Japan will maintain very low interest rates, which is partly behind the Bank of Japan’s interest rate cut in early July. Yen rates fell to their lowest level in nearly three decades.
While such trades typically result in a decline, the yen has recently surged, in part due to the Bank of Japan’s decision to raise short-term interest rates on July 31.
