Japanese Prime Minister Sanae Takaishi said on Wednesday that it is important for currencies to move in a stable manner and reflect fundamentals. Takaishi added that the government will take appropriate measures against excessive and unorganized movements.
Key quotes
It is important that currencies move in a stable manner, reflecting fundamentals.
He will take appropriate action for excessive and uncontrolled movements.
Market reaction
The USD/JPY pair is losing 0.15% on the day to trade at 156.65 at press time.
Frequently asked questions about the Japanese Yen
The Japanese Yen (JPY) is one of the most widely traded currencies in the world. Their value is determined broadly by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the spread between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the powers of the Bank of Japan is to control the currency, so its movements are key to the yen. The Bank of Japan has intervened directly in currency markets on occasion, generally to devalue the yen, although it often refrains from doing so due to the political concerns of its major trading partners. The Bank of Japan’s ultra-loose monetary policy between 2013 and 2024 caused the yen to depreciate against its major counterparts due to the growing policy divergence between the Bank of Japan and other major central banks. More recently, the gradual dismantling of this ultra-lenient policy has given the yen some support.
Over the past decade, the Bank of Japan’s ultra-loose monetary policy stance has led to widening policy divergence with other central banks, especially the US Federal Reserve. This supported the widening of the spread between the US and Japanese 10-year bonds, which favored the US dollar against the Japanese yen. The Bank of Japan’s decision in 2024 to gradually abandon ultra-loose policy, along with interest rate cuts at other major central banks, are narrowing this spread.
The Japanese yen is often viewed as a safe investment. This means that in times of market stress, investors are more likely to put their money into the Japanese currency because of its supposed reliability and stability. Turbulent times are likely to strengthen the value of the yen against other currencies that are considered riskier to invest in.
