Currency market: Japan’s Takaichi reports close contact with US financial authorities

Addressing the currency market, Japanese Prime Minister Sanae Takaichi said on Friday that her government remains in close contact with US financial authorities over foreign exchange developments. Officials would work to maintain orderly conditions in the foreign exchange market, she added.

Key remarks

Won't discuss forex.

In close contact with US financial authorities on currency market.

Will strive to preserve orderly forex market.

Currency rates shaped by multiple factors.

Managing economic and fiscal policy while closely monitoring market trends.

Economy, fiscal policy not designed to influence forex.

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How is USD/JPY trading?

USD/JPY is trading at 159.90, a gain of 0.0q% for the day, at the time of writing.

Japanese Yen: Common Questions

What determines the Japanese Yen’s value?

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

Why are Bank of Japan decisions important for the Japanese Yen?

With currency control among the Bank of Japan’s mandates, its actions carry considerable weight for the Yen. Direct intervention in currency markets has occasionally been used by the BoJ, usually to weaken the Yen. Such action is infrequent, however, because of political concerns among Japan’s main trading partners. Between 2013 and 2024, the BoJ’s ultra-loose monetary stance increasingly diverged from the policies of other major central banks, driving the Yen lower against its main currency peers. The gradual withdrawal of that ultra-loose stance has more recently 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, most notably the US Federal Reserve. The resulting widening in the yield gap between 10-year US and Japanese bonds benefited the US Dollar relative to the Japanese Yen. That gap is now narrowing as the BoJ’s 2024 decision to move gradually away from ultra-loose policy coincides with interest-rate cuts by other major central banks.

How does market risk appetite affect the Japanese Yen?

Often regarded as a safe-haven investment, the Japanese Yen tends to attract funds when markets come under stress, reflecting its perceived reliability and stability. During turbulent periods, the Yen is therefore likely to appreciate against currencies considered riskier investments.