Japan’s Finance Minister Satsuki Katayama indicated on Friday that the government is prepared to react to fluctuations in currency whenever it’s deemed necessary.
main quote
We don’t specify particular currency levels.
We’re always set to respond to currency shifts as required.
If needed, we stand ready to take strong action.
We are prepared to take decisive measures regarding the currency if the situation demands it.
market reaction
At the time of this writing, the USD/JPY is up 0.02% for the day, standing at 162.43.
Frequently asked questions about the Japanese Yen
The Japanese Yen (JPY) ranks among the most traded currencies worldwide. Its value largely hinges on the state of Japan’s economy, but also on aspects like the policies set by the Bank of Japan, the yield difference between Japanese and U.S. bonds, and the overall risk appetite of traders.
One of the core missions of the Bank of Japan involves exchange rate control, making its trends critical for the yen. While the Bank sometimes intervenes directly in the currency markets—predominantly to devalue the yen—such actions are infrequent due to political factors from key trading partners. The ultra-easy policy maintained by the Bank from 2013 to 2024 deepened the policy gap between it and other major central banks, leading to a depreciation of the yen against other significant currencies. Lately, the gradual tapering of this ultra-loose policy has offered some level of support for the yen.
In the past ten years, the Bank of Japan’s dedication to an ultra-easy monetary policy has intensified its divergence from the approaches of other central banks, especially the US Federal Reserve. This has created a noticeable gap between US and Japanese 10-year bonds, favoring the US dollar against the yen. However, this gap is beginning to close with the Bank of Japan’s plan to gradually shift away from its ultra-easy stance in 2024, coupled with interest rate reductions from other major central banks.
Often regarded as a safe haven, the Japanese yen tends to attract investment during market distress. Investors usually flock to the yen in such times, relying on its perceived stability and reliability. Consequently, periods of market turbulence can lead to an appreciation of the yen against other currencies deemed riskier.
