Rapid, one-sided forex moves observed recently: Japan’s Katayama

Recent foreign exchange moves have been rapid and one-sided, Japanese Finance Minister (FM) Satsuki Katayama said on Friday, noting that officials are monitoring these shifts. The government will take appropriate action on currency volatility and engage with the US Treasury to respond suitably, Katayama added.

Katayama’s Key Remarks

To advance utility subsidies for winter, using reserve fund.

Observing one-sided, swift forex shifts recently.

Will engage with US treasury, respond suitably.

US, Japan align on forex policy at summit.

Declines to comment on intervention record.

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

USD/JPY Edges Higher

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

Which factors shape the Japanese Yen’s value?

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.

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 important for the Yen. At times, the BoJ has intervened directly in foreign exchange markets, usually to weaken the currency. Political concerns among Japan’s main trading partners, however, limit how often it does so. From 2013 to 2024, the BoJ’s ultra-loose monetary policy weakened the Yen against its major currency peers as its policy diverged increasingly from that of other leading central banks. The subsequent gradual withdrawal of this ultra-loose stance has provided some support for the Yen.

Why does the US-Japan bond yield gap influence the Japanese Yen?

By maintaining ultra-loose monetary policy over the last decade, the BoJ moved further away from the policies of other central banks, particularly 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 gradually withdraws its ultra-loose policy following its 2024 decision, while other major central banks cut interest rates.

What role does market risk appetite play in the Japanese Yen?

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