Japan's Finance Minister Speaks Out on Currency Chaos

Satsuki Katayama Raises Concerns Over Yen's Sharp Decline

Japan's finance chief, Satsuki Katayama, has expressed concerns about the yen's volatile movements in the currency markets. She warned that Japan might intervene if the situation becomes too chaotic. This warning comes after the yen experienced a significant drop, despite the Bank of Japan's recent interest rate hike.

Katayama's Warning to G7 Counterparts

During an online meeting with her G7 counterparts, Katayama shared her worries about the yen's sharp decline. She hinted that Japan might take action, particularly if speculators were driving the market volatility. This warning is not merely rhetorical; it is supported by a U.S.-Japan agreement that permits interventions to stabilize excessive market volatility.

Market Reactions and Historical Context

The dollar surged nearly 1.2% against the yen, reaching approximately 157.38 yen. This marked the largest one-day jump since early October. Although the yen slightly recovered after Katayama's warning, the initial damage was already done.

Traders are speculating that Japan might intervene if the yen reaches 160 yen, a level where Japan last intervened in the currency market. This intervention occurred in July 2024, when the yen hit a 38-year low.

Bank of Japan's Rate Hike and Future Plans

When questioned about the Bank of Japan's rate hike, Katayama explained that it was based on wage and price trends. The aim is to achieve a 2% inflation target in a sustainable manner. She also mentioned that the Bank of Japan will continue to collaborate closely with the government to reach this target.