Summary:
Japan spokesperson warns of “one-sided” sharp FX moves
Repeats readiness to act against excessive volatility
Follows Katayama’s earlier Washington jawboning
Yen response limited; USD/JPY remains elevated
Weak yen still supports record-high Nikkei
Japanese officials renewed verbal warnings over yen weakness late Monday (US time), but the market reaction was limited, with traders largely keeping USD/JPY elevated and risk sentiment anchored by a powerful equity rally that has taken the Nikkei 225 to record highs.
Japan’s government spokesperson said authorities have observed “one-sided” and “sharp” foreign-exchange moves recently and stressed that currencies should move in a stable manner that reflects economic fundamentals. The spokesperson added that Japan stands ready to take “appropriate steps” to respond to excessive FX volatility, including speculative moves, reiterating the familiar language that Tokyo typically uses to lean against rapid yen depreciation.
The comments followed earlier remarks from Finance Minister Satsuki Katayama, who said she had conveyed concerns about yen weakness and one-sided declines directly to U.S. Treasury Secretary Scott Bessent during meetings in Washington. Despite the stepped-up rhetoric across multiple officials, the near-term impact on FX pricing has so far been modest, with market participants treating the warnings as jawboning rather than a clear signal of imminent intervention.
The muted FX response comes as Japanese equities continue to benefit from a weak yen, which boosts the value of overseas earnings for export-heavy corporates. The Nikkei’s record highs have reinforced the view that policymakers face a delicate balance: a softer currency supports equities and corporate profits, but also raises import costs and squeezes household purchasing power.
The broader backdrop has also been supportive for USD/JPY, with interest-rate differentials still favouring the dollar, the prospect of renewed fiscal stimulus from the government, and traders reluctant to fade the move without a stronger signal from Tokyo. As a result, the latest comments have served mainly to reintroduce two-way risk at the margin, rather than forcing a meaningful reversal.
For now, markets appear to be testing Japan’s tolerance for yen weakness. Unless officials escalate from rhetoric to action, or unless global rates and risk sentiment shift, verbal intervention alone may struggle to deliver sustained yen gains.
