Ready to Intervene? Japan’s Finance Minister Issues Strongest Warning Yet: Yen Plunge Detached from Fundamentals!

Japan’s Finance Minister Katsunobu Kato issued his strongest warning to date on Tuesday amid sharp yen depreciation, hinting the government is prepared to intervene in the currency market. He said Japan retains sovereign discretion in addressing excessive yen volatility.

 

“This is driven by speculation and absolutely does not reflect fundamentals,” Kato said at a press conference.

 

Last Friday, the Bank of Japan raised rates 25 bps to 0.75% — the highest in 30 years. The move was widely anticipated, so the yen only briefly strengthened before quickly retreating.

 

BOJ Governor Kazuo Ueda said in the subsequent press conference that the bank would first assess the impact of this hike before deciding next steps. Investors interpreted this as “the BOJ is in no rush to hike further,” contributing to the yen’s recent weakness.

 

Kato said Tuesday that, based on the September Japan-U.S. currency policy agreement, “the government will take appropriate measures against excessive exchange rate volatility.”

 

Background: Former Finance Minister Shunichi Kato and U.S. Treasury Secretary Bessent signed a joint currency statement in September affirming market-determined rates while preserving intervention room in cases of excessive volatility.

 

Following Kato’s comments, USD/JPY briefly retreated to 155.96 but remained near last Friday’s 11-month low of 157.78.

 

A day earlier, Kato made similar remarks in media interviews, saying Japan would take appropriate action but did not label the recent yen move as detached from fundamentals.

 

Yen weakness has become a major headache for Japanese policymakers, as it pushes up import prices and overall inflation, adding to household cost burdens.

 

Japan’s top currency official, Vice Finance Minister for International Affairs Atsushi Mimura, also expressed deep concern Monday, noting the yen’s cumulative depreciation against the dollar since Friday exceeded 1% — “one-sided and abrupt” volatility.

 

Mimura added the government hopes to “take appropriate measures against excessive volatility” — a phrase traders interpreted as advance notice of potential intervention.