Japan will act against disorderly FX moves; joint statement with US remains in force, Katayama says

Disorderly currency moves will prompt government action, Japanese Finance Minister (FM) Satsuki Katayama said on Monday, adding that the Joint FX statement with the United States (US) remains in place.

What Were Katayama’s Key Remarks?

Will work towards more precise tax revenue estimates, with greater transparency.

Joint FX statement with US remains in place; will take action against disorderly moves.

Declines to offer comments on specific FX levels.

According to PM Takaichi, an undervalued yen creates problems.

Keeping FX markets stable is crucial.

Levels at present are neither good nor bad.

Conditions have improved compared with before.

Chaotic fluctuations need to be avoided.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

How Is USD/JPY Trading?

USD/JPY is trading at 157.80 at the time of writing, a gain of 0.14% for the day.

Japanese Yen: Frequently Asked Questions

Which Factors Shape the Japanese Yen’s Value?

Among the world’s most actively traded currencies, the Japanese Yen (JPY) takes its broad direction from Japan’s economic performance. More specific influences include the Bank of Japan’s policy stance, the gap between Japanese and US bond yields, and traders’ appetite for risk, alongside other factors.

Why Do Bank of Japan Decisions Matter for the Japanese Yen?

Currency control forms part of the Bank of Japan’s mandate, making its actions an important influence on the Yen. At times, the BoJ has intervened directly in currency markets, usually to weaken the Yen. However, political concerns among its main trading partners discourage frequent intervention. Between 2013 and 2024, the BoJ’s ultra-loose monetary policy weakened the Yen against its major currency peers as the policy gap between the Bank of Japan and other leading central banks widened. The more recent, gradual withdrawal of this ultra-loose stance has provided some support to the Yen.

Why Does the US–Japan Bond Yield Gap Matter for the Japanese Yen?

By maintaining ultra-loose monetary policy over the past decade, the BoJ increasingly diverged from other central banks, notably the US Federal Reserve. As a result, the yield gap between 10-year US and Japanese bonds widened, supporting the US Dollar against the Japanese Yen. That gap is now narrowing following the BoJ’s 2024 decision to move gradually away from ultra-loose policy, alongside interest-rate cuts by other major central banks.

How Does Risk Appetite Influence the Japanese Yen?

During periods of market stress, investors are more likely to move money into the Japanese Yen, which is widely regarded as a safe-haven investment because of its perceived reliability and stability. Such turbulence is therefore likely to lift the Yen against currencies viewed as riskier investments.