Japan’s Finance Minister Satsuki Katayama signaled growing concern over the yen’s sharp decline, suggesting Tokyo may step up market interventions to stabilize the currency. Katayama emphasized shared worries with U.S. Treasury Secretary Scott Bessent over what she described as the yen’s recent “one-sided depreciation.”
Speaking to reporters in Washington after a bilateral meeting with Bessent on the sidelines of a multilateral forum on critical mineral supply chains, Katayama stressed the potential risks posed by the currency’s slide. “I conveyed my deep concern over the one-sided depreciation of the yen, seen also on January 9, and Secretary Bessent shared this view,” she said, hinting at tacit U.S. approval for intervention measures if needed.
The yen recently crossed the 158-yen-per-dollar threshold for the first time in roughly a year. Market observers linked the slide to reports that Prime Minister Sanae Takaichi may call a snap election in February. Analysts said the prospect of an election win could strengthen Takaichi’s mandate for her expansionary fiscal agenda, which has raised concerns over further pressure on the yen.
The weak yen has complicated matters for policymakers, raising import costs and affecting household finances. Observers also noted the political dimension, suggesting that a prolonged slide in the currency could influence Takaichi’s popularity ahead of the potential election.
Deputy Chief Cabinet Secretary Masanao Ozaki reiterated Japan’s readiness to respond to excessive currency moves. “The government will take appropriate steps on excessive currency moves, including speculative ones,” Ozaki said, while declining to comment on the election reports, noting that the timing of a parliamentary dissolution is the Prime Minister’s prerogative.
Experts highlighted that Japan’s argument for intervention rests on the yen’s deviation from economic fundamentals, despite a narrowing interest rate gap with the U.S. “Japan’s argument is that yen-buying interventions should be justified as the yen’s recent weakness… deviates from fundamentals,” said Hiroyuki Machida, director of Japan FX and commodities sales at ANZ. He added that current yen selling may continue until election outcomes and fiscal policy directions become clear, suggesting that intervention may be delayed until the yen reaches around 160 per dollar.
Katayama has repeatedly emphasized that Tokyo retains “a free hand” in addressing excessive yen movements, citing a joint statement by Japan and the U.S. issued in September. The statement reaffirmed a commitment to market-determined currency rates while allowing foreign exchange interventions to address excessive volatility. Japanese officials have referenced the statement as justification for potential market action when the yen swings beyond economic fundamentals.
While the yen’s slide dominated attention, Katayama also addressed concerns over China’s export policies during the multilateral rare earths meeting. She criticized Beijing’s ban on exports of certain items to Japan, including those with both civilian and military applications, describing it as “highly problematic.” Katayama said the restrictions, which extend to re-exports affecting third countries, could complicate supply chains for critical minerals, a key focus of the international forum.
A U.S. Treasury spokesperson did not immediately respond to requests for comment on the bilateral meeting. Market watchers continue to monitor both political developments in Japan and fiscal policy announcements, as the yen’s path remains closely tied to domestic political and economic signals.
As Tokyo evaluates intervention options, analysts say the yen’s trajectory will likely depend on upcoming election developments, fiscal policy direction, and global market reactions. The combination of domestic political uncertainty and currency volatility places Japanese policymakers in a delicate balancing act, weighing economic fundamentals against strategic monetary action.
