Japan says it cannot comment on market intervention; U.S. says yen is highly undervalued

[Financial News, Tokyo = Reporter Seo Hye-jin] Japan's Finance Minister Satsuki Katayama said on the 31st that she could not answer questions about the yen's plunge to the 157-yen range per dollar at one point late the previous night, adding that the government was responding with constant vigilance. She neither confirmed nor denied whether authorities had intervened in the foreign exchange market.
According to Nikkei, Inc. and other outlets, Katayama made the remarks while speaking with reporters on the day. Atsushi Mimura, vice finance minister for international affairs, also declined to confirm whether intervention had taken place, saying, "I will refrain from commenting."
Mimura did say, however, that Japan was receiving support from U.S. authorities that went beyond simple moral backing, and that the two sides were in close contact on all matters. He added that Japan was also communicating closely with other countries, not just the United States.
It was also reported that, after the Japanese government and the Bank of Japan (BOJ) stepped in the previous night to buy yen and sell dollars, U.S. monetary authorities conducted a so-called rate check just before the intervention.
In the New York foreign exchange market on the 30th local time, the yen was trading around 162.80 per dollar before the intervention, then briefly plunged to the upper 157-yen range. It later fluctuated around 160 yen in the Tokyo foreign exchange market on the 31st. ■U.S. Treasury Secretary confirms yen is undervaluedThe United States also publicly acknowledged that the yen is undervalued. On the 30th, the U.S. Department of the Treasury confirmed a Fox Business post quoting Scott Bessent as saying that "the yen is very undervalued and extremely cheap," and that "given the fundamentals of the Japanese economy, the yen should rise."
Bessent also said of Prime Minister Sanae Takaichi that she is "very popular and is pushing strong policies," adding that "once the effects of those policies are reflected in economic fundamentals, the market will also come to recognize the yen's undervaluation."
The previous day, the Korean won also strengthened sharply against the dollar, prompting market speculation that South Korea's currency authorities may also have intervened to buy won.
■Market says surprise intervention had a big effect
Market participants said the intervention, carried out at an unexpected time just before the BOJ's monetary policy meeting, amplified its effect in defending the exchange rate.
Daisuke Ueno, chief foreign exchange strategist at Mitsubishi UFJ Morgan Stanley Securities, said, "The market expected intervention after the BOJ meeting, but the authorities caught traders off guard and dealt a significant blow to speculative players." He added, "If the 160-yen level comes under threat again, the likelihood of additional intervention will rise." He also predicted that thinner trading volume in August could increase exchange-rate volatility even on small orders.
Norihiro Wakabayashi, head of the Tokyo branch of State Street Bank, said, "This intervention was successful in the sense that market participants will now have no choice but to factor in the possibility of intervention whenever they build yen-short positions." He added, however, that "the effect of intervention is temporary, and a lasting yen rally would require a change in monetary policy, such as further rate hikes by the BOJ." He also said that if additional intervention were carried out after Governor Kazuo Ueda's news conference, the yen could fall to around 155 per dollar.
Fumito Aizawa, chief market analyst at SMBC Trust Bank, said, "A surprise intervention can produce short-term effects, but as long as Sanae Takaichi's administration maintains its aggressive fiscal policy, downward pressure on the yen is likely to continue." He added, "The surprise intervention after the Federal Open Market Committee (FOMC) shows close coordination with the United States," and predicted that another intervention could come in the first week of August.
Meanwhile, the Japanese government and the BOJ also intervened to buy yen at the end of April. Between April 28 and May 27, they injected a total of 11.7349 trillion yen into the market. Market participants now believe that this time as well, authorities are likely to defend the currency through multiple rounds of intervention rather than a one-off move.
[email protected] Seo Hye-jin Reporter