A newly designed 10,000 yen note passes through a machine at the Tokyo Factory of the National Printing Bureau on Wednesday, June 19, 2024 in Tokyo, Japan. Suppress private consumption.
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Japan's top monetary diplomat Atsushi Mimura said authorities are “always watching the market” as a new round of economic recovery JPY Public broadcaster NHK quoted him as saying in an interview on Friday that arbitrage trading could exacerbate market volatility.
According to NHK, Mimura said that most of the yen arbitrage trades established in the past may have been closed.
“But if such measures increase again, it may exacerbate market volatility. We have been watching the market to ensure that this does not happen,” Mimura said.
He said authorities are ready to take action if currency trends become extremely volatile and deviate from fundamentals, causing losses to businesses and households, NHK reported.
In July, Mimura succeeded 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 low cost to invest in other currencies and higher-yielding assets, is built on expectations that the Bank of Japan will maintain ultra-low interest rates, which is partly responsible for the yen's slide to nearly 3 One of the reasons.
The Bank of Japan's decision to raise short-term interest rates on July 31 resulted in large-scale unwinding of such trades, which has recently led to a sharp rebound in the yen.