Japan is prepared to act against excessive swings in the yen, Finance Minister Satsuki Katayama said on Tuesday, delivering Tokyo’s strongest warning so far that authorities are ready to intervene in foreign exchange markets to curb sharp currency declines.
Speaking at a press conference, Katayama said recent moves in the yen do not reflect underlying economic fundamentals. Her comments followed remarks made last week by Bank of Japan Governor Kazuo Ueda, after which the currency weakened further.
Katayama stressed that such large movements are likely driven by speculation rather than genuine market forces. She added that the government would take appropriate action against excessive volatility, in line with Japan’s September agreement with the United States on exchange rate policy.
Her comments echoed statements made a day earlier in a media interview, but Tuesday’s remarks were more explicit in linking yen weakness to deviations from fundamentals.
Following her warning, the yen strengthened to around 156 per U.S. dollar, although it remained close to the 11-month low of 157.78 reached last Friday.
Under a joint statement issued in September, Japan and the U.S. reaffirmed their commitment to market-determined exchange rates. The agreement also states that currency intervention should be used only to address extreme volatility. Japanese officials have repeatedly cited this framework as justification for stepping into markets when yen movements become excessive.
Japan last intervened in July 2024, when authorities bought yen after it fell to a 38-year low near 162 per dollar.
According to Hiroyuki Machida, head of Japan FX and commodities sales at ANZ, intervention would likely follow if the dollar were to rise beyond post–BOJ levels toward 158 yen or higher.
A persistently weak yen has become a growing concern for policymakers, as it raises import costs and fuels inflation, putting pressure on household budgets.
Katayama’s tone on Tuesday was notably firmer than on Monday, when she said the government would act if needed but stopped short of saying currency moves were disconnected from fundamentals.
Last Friday, the BOJ raised interest rates to 0.75%, the highest level in three decades, marking another step away from years of ultra-loose monetary policy. While the move narrowed the interest rate gap with the U.S., the yen continued to weaken after markets interpreted Ueda’s post-meeting comments as signaling a slow pace of future tightening.
Machida noted that the yen’s weakness reflects a combination of reflationary fiscal policy and the BOJ’s still-accommodative monetary stance. With Prime Minister Sanae Takaichi’s government preparing an expansionary budget for the next fiscal year, he said further monetary tightening would be needed to support a sustained recovery in the currency.
