Japan’s Finance Minister Satsuki Katayama said on Friday that the authorities are always ready to react suitably as needed on foreign exchange.
Meanwhile, Japanese Prime Minister Sanae Takaichi stated that weak Japanese Yen (JPY) has both advantages and disadvantages. She added that the economic policy aims to strengthen Japan’s economic capacity and not to manipulate currency.
Key quotes
Will act if currency volatility rises, inflation pressures deepen.
Declines to comment on currency levels.
Always ready to react suitably as needed on forex.
Middle East conflict and oil price shifts also weigh on weak yen.
Markets highly volatile since strait of Hormuz effectively closed.
Joint statement with US enables decisive action on currency when needed.
FX volatility very high with speculative trades driving major yen shifts since Iran war began in February.
Market reaction
As of writing, the USD/JPY pair is down 0.02% on the day at 160.00.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.