Japan’s finance minister, Satsuki Katayama, has issued a strong warning against speculative moves in the yen, signalling that authorities have a “free hand” to take decisive action against currency fluctuations not supported by economic fundamentals.
Speaking to Bloomberg on Monday, Katayama criticised the yen’s sharp depreciation late last week, which occurred despite the Bank of Japan’s (BOJ) recent interest rate hike to the highest level in 30 years. She described the weakening as “clearly not in line with fundamentals but rather speculative” and affirmed that Japanese authorities stand ready to intervene if volatility escalates. Katayama referenced the Japan–US finance ministers’ joint statement, which preserves the option of intervention during periods of excessive currency volatility.
Her remarks reinforced yen strength during European and US trading sessions on Monday, building on earlier gains seen in the Asian market. These initial gains followed a verbal intervention from Japan’s chief currency diplomat, Atsushi Mimura. Mimura cautioned against “one-sided” and “sharp” foreign exchange movements, which led to some short-covering in USD/JPY.
Katayama’s invocation of the bilateral agreement with the United States implies that Tokyo believes it can intervene in the foreign exchange market without needing further negotiation. This agreement, signed in September by Katayama’s predecessor Katsunobu Kato and US Treasury Secretary Scott Bessent, acknowledges that exchange rates should be market-determined but allows for intervention in cases of disorderly moves.
Last year, Japan spent approximately US$100 billion defending the yen, focusing intervention around the ¥160 level. As of Monday evening, the currency was trading nearer to ¥157.40. Katayama did not specify exact trigger levels for intervention, emphasising that each instance of excessive volatility will be assessed individually.
Apart from foreign exchange issues, Katayama also addressed the near-term challenges facing Japan’s public finances. She noted that aggressive fiscal stimulus under Prime Minister Sanae Takaichi’s government has raised concerns. These worries contributed to Japan’s 10-year government bond yield reaching a 27-year high of 2.1% on Monday. Nevertheless, Katayama expressed confidence that any deterioration in fiscal conditions would be temporary, anticipating that stronger growth, increased investment, and higher tax revenue will follow.
Original Source: Eamonn Sheridan of investinglive.com
