After reports that Japan-U.S. leaders viewed yen weakness as a problem, the yen temporarily rebounded before becoming active again. Against the backdrop of comments from financial authorities, caution over intervention is growing, and attention is focused on the yen's future direction.
Following reports that concerns over yen weakness had been expressed at last week's Japan-U.S. summit, Finance Minister Katayama Satsuki (片山さつき) said after an online meeting, “The yen's undervaluation, which was also discussed at the Japan-U.S. summit, is a problem.” U.S. Treasury Secretary Bessent also conveyed the view that “a strong yen is desirable.” As a result, dollar-yen moved from the ¥159 range to a stronger yen by about ¥2 before at one point returning to the upper ¥157 range.
In subsequent remarks, Vice-Minister of Finance Mimura Jun (三村淳) described the message as “very clear” and indicated a policy of continuing discussions on foreign exchange with the finance minister and at his own level. While the market's caution over intervention has intensified, moves toward a stronger and weaker yen have crossed amid the effects of U.S. interest-rate trends and oil prices.
Differences in the relative stances of Japanese and U.S. monetary policy are seen as underlying pressure on the yen, and views have spread that the BOJ's pace of rate hikes and the Fed's rate-hike outlook will determine market movements. Going forward, U.S. indicators such as employment data and the PCE deflator, developments in the situation in Iran and oil-price trends could affect the yen.
In Japan, there have also been reports that the Takaichi administration has indicated a policy shift toward accepting yen weakness, but concerns remain over the framework of fiscal policy and fiscal soundness. Depending on future comments and indicators, the market's direction could shift again.