Finance Minister Kato said he is “deeply concerned” about recent moves, including those driven by speculators. — Bloomberg
TOKYO: Japan flagged its concern over sudden and one-sided moves in the currency market in its first warning to speculators in 2025 after the yen hit its lowest level since July.
“We will take appropriate action if there are excessive movements in the currency market,” Finance Minister Katsunobu Kato told reporters yesterday, in a veiled threat of direct intervention.
Kato said he is “deeply concerned” about recent moves, including those driven by speculators.
The finance minister spoke after the yen touched 158.42 against the US dollar yesterday morning, its weakest in almost six months.
The yen strengthened following Kato’s remarks.
The currency was trading around 158.11 at lunchtime in Tokyo.
The yen continues to languish close to levels that prompted intervention in the summer after expectations over the timeframe for interest rate hikes in Japan, and rate cuts in the United States were both pushed back in December.
The difference in rates and yields in the two economies is among the key drivers of the exchange rate.
Japan stepped into the currency market four times in 2024, spending almost US$100bil to prop up the yen.
The last two interventions came in July when the yen crossed the 160 threshold against the dollar.
Any further changes in expectations over the trajectory of rates in the United States or Japan could sharply ramp up speculation of renewed intervention.
US jobs figures released this Friday evening may be among the potential catalysts for sudden moves in the exchange rate.
Following Bank of Japan (BoJ) governor Kazuo Ueda’s unexpectedly cautious messaging on interest rates at the December policy meeting, expectations for a near-term rate hike have weakened.
Overnight swaps yesterday indicated a 48% chance of BoJ move in January.
Additionally, that compares with expectations in early December of more than 80% that the central bank would move by January.
During a series of New Year speeches on Monday, Ueda indicated that the BoJ would still raise the benchmark rate if the economy continues to improve this year, keeping the door open for rate hike at one of its coming meetings. The US jobs data on Friday could weaken the yen if it proves stronger than expected and pushes US rate cut expectations further back.
BoJ deputy governor Ryozo Himino’s speech next week is likely to be a key event for gauging the timing of Japan’s next rate hike and the likelihood it might come in January or March.
The BoJ will also hold a branch managers’ meeting later this week, and may provide further insights into the state of wage trends in Japan’s regions, a key area of interest for Ueda.
Globally, policy signals from incoming US President Donald Trump have added to the yen’s volatility.
A report suggesting Trump might roll back tariffs had initially weakened the dollar overnight but was followed by a rebound after the president-elect denied the report. — Bloomberg
