By Makiko Yamazaki, Leika Kihara and Dhara Ranasinghe
TOKYO/LONDON, May 1 (Reuters) – Japan’s yen jumped sharply on Friday as the country’s top foreign exchange diplomat said Tokyo was ready to step back into markets, hours after official buying lifted the fragile currency.
Atsushi Mimura’s comments and the yen’s sudden jump sparked speculation among currency traders of another round of intervention by Japan.
Having held steady overnight, the dollar dropped in London morning trade, falling by as much as 0.66% to a session low of 155.60 from 157.12 earlier, triggering talk of further intervention among already nervous currency traders. It was at 156.60 as of 1005 GMT.
It was not immediately clear what was behind Friday’s move, but analysts said markets were on edge after Thursday’s session.
Central bank data published late on Friday showed Japan may have spent as much as 5.48 trillion yen ($35 billion) bolstering its embattled currency, just shy of the $36.8 billion last spent on intervention in July 2024.
“Liquidity is thin and people are nervous after yesterday so there is a susceptibility to volatility in the dollar/yen,” said Jeremy Stretch, head of G10 FX strategy, CIBC Capital Markets.
Tokyo’s ramped-up rhetoric comes as the yen stays under pressure from wide U.S.-Japan interest rate gaps and ahead of a holiday stretch officials fear could invite speculative moves.
“I won’t comment on what we’ll do ahead. But I will tell you that Japan’s Golden Week holidays have just started,” Mimura told reporters when asked whether Tokyo could intervene in the currency market.
Japan’s finance minister, Satsuki Katayama, warned on Thursday “decisive action” was approaching. She also urged reporters to keep their smartphones on hand during the holidays, a pointed signal of Tokyo’s readiness to intervene and deter speculators from exploiting thin liquidity to push the yen lower.
Hours later, Japan stepped into the market to support the yen, its first official currency intervention in nearly two years, two sources familiar with the matter told Reuters, sending the Japanese currency as much as 3% higher.
Mimura declined to comment on whether Japan intervened in the currency market on Thursday and when asked whether currency moves remained speculative, replied: “There’s no change to my view on markets.”
Japan remains in “extremely close contact” with the U.S., Mimura said, adding that both countries agree action may be needed depending on market developments.
