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The Japanese currency has fallen to its lowest level against the US dollar since the mid-1980s and now a single question looms in the minds of traders: what is the next move by Atsushi Mimura, vice minister of finance for international affairs and the man better known to markets as “Mr Yen”?
On Tuesday, after several weeks of steady decline and a 13.5 per cent fall since the start of 2026, the yen finally dropped through ¥162 versus the dollar — a line where the Japanese authorities have previously stepped in to defend the currency directly.
Verbal interventions by Japan’s finance minister, Satsuki Katayama, no longer have any effect, but with Mr Yen keeping silent in public since early June on the prospect of intervention, some traders believe he is preparing a surprise attack on speculators that could shake up the market.
Many analysts, including Nomura’s chief FX strategist Yujiro Goto, said Tuesday’s drop in the yen made intervention a “reasonably high probability” — possibly when the ¥163 level was breached and potentially timed to coincide with light trading ahead of America’s July 4 holidays.
Osamu Takashima, Japan FX strategist at Citi, noted that, just ahead of the Japanese government’s currency intervention in late April, Mimura spoke in public to issue a “final warning” to speculators.
“Because of that, the effect of the intervention may have been minimised, so I think that this time he may want to deliver a surprise. Katayama is in a position where she has to speak, but I think [Mimura’s] silence is a strategy,” said Takashima.
Mimura’s reticence could be an attempt to lure speculators into a trap, said Goto of Nomura.
“I think there is a change of communication, and they want the surprise factor. Most clients thought that the authorities would intervene at around ¥162 and now that they have breached that level, some investors may be changing positions,” said Goto.
With no official action so far, some speculators might now overextend their bets against the yen, making the effect of a surprise intervention even greater, Goto said.
Another factor in the calculations of Mimura and the Japanese authorities, said FX strategist Shusuke Yamada at Bank of America, could be the part that a record-breaking rally in Tokyo stocks had played in the currency’s decline.
Over the past 12 months, the Nikkei 225 has risen almost 76 per cent, fuelled by inflows from foreign investors buying companies with AI and semiconductor exposure.
Many foreign funds have currency-hedged their equity investments, and as the stock market rises, they need to increase their hedges. That puts steady downward pressure on the yen.
Any intervention move by Mimura could, therefore, be offset by a continuation of the equity rally.
Others wonder whether the relatively orderly yen movements of recent weeks justify government intervention.
“The Ministry of Finance says it doesn’t intervene to protect a particular level of the yen and the recent moves have not been at all crazy,” said one Tokyo-based trader. “But I think Mimura can easily argue that the yen is no longer reflective of fundamentals.”
Japanese officials do indeed argue that the yen has become detached from fundamentals, noting that when the Bank of Japan raised interest rates to a 31-year high of 1 per cent last month, the impact on the yen was negligible.
Similarly, say officials, when the Iran war began, and crude oil prices rose sharply, markets took that as a reason for further yen selling. Yet when crude prices reversed last month, dropping from more than $100 a barrel in mid-May to around $70 today, the yen continued to slide.
Naomi Fink, chief economist at Amova, said that the yen’s detachment from some of these events could be seen as an argument for intervention.
The Japanese authorities, said Fink, had deep reserves but would want to use them as effectively as possible. “When there are logical inconsistencies in the market, interventions can be quite effective,” she said.
