Japan top FX diplomat says watching for any build-up of yen carry trades, NHK reports By Reuters

TOKYO (Reuters) – Japan’s top currency diplomat Atsushi Mimura said in an interview broadcast on Friday that authorities are “always monitoring markets” while renewed yen trading could increase market volatility, public broadcaster NHK reported.

Mimura said that yen trades built up in the past are likely to be mostly liquidated, according to NHK.

“But if such moves increase again, it could lead to increased market volatility. We are always monitoring the markets to make sure that does not happen,” Mimura was quoted as saying by Bloomberg.

He said authorities were prepared to act if currency moves became too volatile and deviated from fundamentals in a way that caused losses to businesses and households, according to NHK.

In July, Mimura took over as vice finance minister for international affairs, the role that oversees Japan’s currency policy, succeeding Masato Kanda.

High-yield yen trading, which involves borrowing yen at a low cost to invest in other currencies and assets that offer higher returns, has surged on expectations that the Bank of Japan will keep interest rates ultra-low and was partly behind the Japanese currency’s slide to its lowest in nearly three decades in early July.

The massive decline in such deals, partly due to the Bank of Japan’s decision on July 31 to raise short-term interest rates, has led to a sharp rebound in the yen’s value recently.