On Friday (June 28), Japan's Ministry of Finance appointed Atsushi Mimura as the new Deputy Minister of Finance, succeeding Masato Kanda, who is about to retire, to become the highest-ranking official in charge of foreign exchange affairs in Japan.

Since taking office in 2021, Kanda has experienced events such as the pandemic and the long-term trend of yen depreciation, and is known for his charismatic role as a policy spokesperson. In June last year, the Ministry of Finance extended Kanda's term for another year, making him the fourth official in the past 30 years to serve as Deputy Minister for International Affairs for three consecutive years. At that time, the market interpreted this unusual move as a reaffirmation of the Japanese authorities' stance to intervene in the foreign exchange market when necessary.

Kanda has always been seen by the market as the "man behind the scenes" of the Japanese government's strategy to use $65 billion to intervene in the foreign exchange market in 2022. This year, Kanda once again promoted a record 9.8 trillion yen of foreign exchange intervention between the end of April and early May to support the yen. After the Bank of Japan's interest rate decision in June announced a reduction in bond purchases, but also stated that specific details would be left until after the July interest rate meeting, the yen began a new round of depreciation against the US dollar. In response, on Monday, Kanda warned that the Japanese government is ready to intervene in the foreign exchange market around the clock if necessary, and said that the United States' move last week to include Japan on the foreign exchange monitoring list will not affect Japan's policy choices.

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The appointment of Atsushi Mimura will officially take effect on July 31. Unlike Kanda's clear stance, the market currently knows very little about Mimura's monetary stance.

The 57-year-old is currently the Director-General of the International Bureau of the Ministry of Finance. Nearly one-third of his 35-year government career has been spent on banking supervision, and he has professional knowledge and international connections in the field of financial regulation. During his three-year tenure at the Bank for International Settlements, he worked with Draghi to establish the Financial Stability Board during the 2008-2009 global financial crisis to reform financial regulation. During his time at the Ministry of Finance, he participated in the revision of the Japan Bank for International Cooperation (JBIC) related legislation last year to expand the business scope of this state-owned bank and make key foreign companies in Japan's supply chain eligible for loans from the bank. Mimura also served on a government team responsible for briefing foreign investors on Japan's revision of foreign ownership rules in 2020 to alleviate foreign investors' concerns that the revision was mainly aimed at preventing foreign investment in Japan.

Tatsuo Yamasaki, former Deputy Minister of Finance and current professor at the International University of Health and Welfare, said that Mimura faces "an extremely weak yen and ongoing regional conflicts." At the same time, "the global economy is facing a turning point in the monetary policy of Europe and the United States. Against this backdrop, the Deputy Minister of Finance will participate in discussions on how to stabilize the global economy." Overall, he believes that when making statements on economic or monetary issues, officials of the Ministry of Finance "act as an organization under the guidance of the Minister of Finance," so it is expected that Mimura will continue the current policy.

Although it is a routine personnel appointment, the timing of this appointment is very special. This Friday's Asian morning session saw the yen continue to fall against the US dollar, once breaking through the key 161 level, setting a new 34-year low, and falling to the lowest level since 1986 in 38 years.

The short-term factor is that Friday's Asian morning session coincided with a debate between former US President Trump and current President Biden, during which the US dollar continued to rise against other major currencies. In this quarter, the yen has fallen 6% against the US dollar, and has fallen 12% so far this year, recording the largest drop among the G10 currencies. The yen's exchange rate against the euro also fell to 172.37, a historical low.

The most concerning issue for the market at present is undoubtedly when the Japanese authorities will intervene in the foreign exchange market again. At the same time as announcing the appointment, Japanese Finance Minister Shunichi Suzuki said at a routine press conference on Friday that the authorities are "deeply concerned" about the impact of "rapid and one-sided" fluctuations in foreign exchange on the economy, will respond appropriately to excessive currency fluctuations, and maintain confidence in the yen. "The government is closely monitoring the development of the foreign exchange market with a high sense of urgency." He added that it is also crucial to continue efforts to promote fiscal reform.

According to the latest analysis by ING, the specific point at which the Japanese authorities intervene in the foreign exchange market has risen. ING foreign exchange strategist Francesco Pesole said that Kanda had indicated in February that a 10% depreciation of the yen against the US dollar within a month was considered "rapid," which hinted at some clues about the exchange rate level required for intervention. In April of this year, the US dollar rose from a low of 150 to just below 160 against the yen in less than a month, and Japan intervened at that time, in line with Kanda's hint. Pesole added that the recent trend of the US dollar against the yen has been described as "rapid," but not "excessive," which may be the new terminology of the Japanese authorities. In the past 30 days, the low point of the US dollar against the yen was 154.60, and according to this 10% range, this would put the intervention level at 164/165.The foreign exchange research team at CICC believes that the difficulty for Japanese authorities to carry out foreign exchange intervention in the short term may have increased. On one hand, Japan has recently been re-included in the US Treasury's currency manipulation monitoring list, which may be related to previous foreign exchange interventions; on the other hand, "stubbornly defending" a certain level may instead attract more speculative capital, which is not a rational move.

Pasolo also stated, "It is clear that foreign exchange intervention is a temporary measure to curb volatility, not a solution to structural overselling. Ultimately, Japanese officials also know that the impact of US macroeconomics and the Federal Reserve on the yen is more significant than any other factor." Based on this, he anticipates that Japanese authorities may wait until the release of the US May core PCE on Friday before deciding whether to intervene. If the US data further strengthens the US dollar, then it would be almost inevitable for Japanese authorities to intervene in the dollar-yen exchange rate, with a new intervention level potentially closer to 165.