Japan Finance Minister Satsuki Katayama said the government may intervene in the foreign-exchange market to stabilize the yen against the U.S. dollar.
This signal comes as the yen reaches its weakest level in roughly 40 years [4]. Prolonged currency depreciation increases the cost of imports, which can drive up inflation for Japanese consumers and businesses.
Katayama said during a press briefing that the government's policy has not changed and that it would take "appropriate and decisive action" whenever necessary [1]. She said this stance following a cabinet meeting later that month [2].
The Japanese currency has faced significant downward pressure, reaching levels between 161.8 [3] and 163 [1] yen per U.S. dollar. Some reports indicate the currency broke the 162 yen threshold [2] during this period of volatility.
Officials said the decline was due to deteriorating geopolitics in the Middle East, which spurred increased buying of the U.S. dollar [1]. This trend has pushed the yen to a 39-year low [3].
Katayama focused her warnings on market volatility. She said that the government would take resolute measures if there were speculative movements in the currency market [3].
Japan has a history of intervening in currency markets to prevent rapid fluctuations that could destabilize the national economy. By signaling a readiness to act, the Finance Ministry aims to discourage traders from betting against the yen.
“"appropriate and decisive action"”
The Japanese government is attempting to use verbal intervention to stabilize the yen without necessarily spending foreign reserves. By warning against speculative trading, Katayama is signaling to global markets that the government views the current depreciation as excessive and potentially harmful to economic stability, specifically regarding import-driven inflation.
