Japan’s Katayama pledges action against disorderly moves, says joint FX statement with US remains in force

Japan’s Finance Minister (FM) Satsuki Katayama stated on Monday that the joint foreign exchange statement with the United States (US) remains in effect and that the government will take action against disorderly currency movements.

Key Remarks

Will seek to improve transparency and estimate tax revenue accurately.

Joint FX statement with US remains in effect; will take action against disorderly movements.

Offers no comment on specific FX levels.

According to PM Takaichi, an undervalued yen presents problems.

Stability in FX markets is essential.

Present levels are neither favourable nor unfavourable.

Conditions have improved from earlier levels.

Chaotic fluctuations must be avoided.

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

0.14% Daily Gain for USD/JPY

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

Japanese Yen: Frequently Asked Questions

Japanese Yen: Main Exchange Rate Drivers

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

Bank of Japan Policy and the Yen

Currency control forms part of the Bank of Japan’s mandate, making its actions a major influence on the Yen. Direct intervention in currency markets has occurred on occasion, usually to weaken the Yen. However, political concerns among Japan’s main trading partners discourage frequent intervention. Between 2013 and 2024, the BoJ’s ultra-loose monetary policy increasingly diverged from that of other major central banks, driving the Yen lower against its main currency peers. The gradual unwinding of that policy has more recently provided some support for the Yen.

10-Year Yield Gap: Implications for the Japanese Yen

By maintaining ultra-loose monetary policy over the last decade, the BoJ increasingly diverged from other central banks, especially the US Federal Reserve. That divergence helped widen the yield gap between 10-year US and Japanese bonds, supporting the US Dollar against the Japanese Yen. The gap is now narrowing as the BoJ’s 2024 decision to phase out ultra-loose policy combines with interest-rate cuts by other major central banks.

Risk Sentiment and Demand for the Japanese Yen

Investors often regard the Japanese Yen as a safe haven, making them more inclined to move funds into the currency during periods of market stress because of its perceived reliability and stability. Such turbulence is likely to lift the Yen against currencies considered riskier investments.