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Japan’s leading currency diplomat, Atsushi Mimura, emphasized the importance of monitoring market activity to prevent a resurgence of yen carry trades that could lead to increased volatility, as reported by NHK on Friday.

Mimura noted that past yen carry trades have largely been unwound, reducing market risk. However, he expressed concern that a potential revival of such trades could bring about instability. He assured that authorities are closely monitoring the situation to prevent any adverse effects on businesses and households.

In his role as vice finance minister for international affairs since July, Mimura has taken on the responsibility of overseeing Japan’s currency policy. Yen carry trades, which involve borrowing yen at low rates to invest in higher-yield assets, had contributed to the yen’s depreciation earlier in the year. The recent reversal of these trades following the BOJ’s decision to raise Interest rates has resulted in a significant yen appreciation.

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