Katayama’s comments come directly on the heels of the US Treasury’s semi-annual currency report, which called excessive yen volatility undesirable and pressed the Bank of Japan to keep normalising policy. By explicitly citing the joint US-Japan statement in that report, Katayama is aligning Tokyo’s rhetoric with Washington’s language rather than pushing back against it, while still reserving the option to intervene unilaterally. The readiness to take decisive action, paired with confirmation of round the clock communication with the US, keeps intervention risk live for anyone positioned short yen into a 40 year low, even though Katayama declined to name specific levels that would trigger action.
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Japan’s finance minister is leaning on Washington’s own words to justify staying ready to intervene on a yen at 40 year lows.
Summary:
- Finance Minister Katayama said the US Treasury’s forex report cited the joint US-Japan statement that excessive forex volatility is undesirable
- She said Japan and the US are communicating closely on a 24 hour basis
- Katayama declined to comment on specific currency levels
- She said Japan is ready to respond appropriately to currency moves at any time as needed
- She said Japan is ready to take decisive action on forex
- The comments follow the US Treasury’s semi-annual currency report, which called for further BOJ rate hikes and flagged substantial yen undervaluation, released as the yen hit a 40 year low against the dollar
Japan’s Finance Minister Katayama said Tokyo stands ready to take decisive action on the yen, invoking language from the US Treasury’s own currency report to reinforce the case for intervention if currency moves become excessive. Katayama noted that the Treasury’s semi-annual report had cited the joint US-Japan statement describing excessive forex volatility as undesirable, a framing that gives Tokyo’s warnings a degree of shared cover with Washington.
The finance minister said Japan and the United States are in close communication around the clock, though he declined to comment on any specific currency levels that might prompt action. She reiterated that Japan is ready to respond appropriately to currency moves at any time as needed, and separately said the country stands ready to take decisive action on the foreign exchange market.
The remarks follow directly from the Treasury’s report released earlier, which called on the Bank of Japan to continue raising interest rates and found that persistent yen weakness, down 51% against the dollar in real effective terms since the end of 2011, has left the currency substantially undervalued. That report landed on the same day the yen touched a 40 year low against the dollar, a coincidence that has kept traders on alert for intervention ever since.
By explicitly referencing the Treasury’s own language rather than issuing a standalone warning, Katayama appears to be using Washington’s report as a shared basis for justifying potential action, rather than framing intervention as a purely unilateral Japanese response. That approach may also reflect the political backdrop, with premier Sanae Takaichi’s administration seen by some investors as less committed to the BOJ’s rate hike path than Washington would like, leaving currency intervention as one of the few tools Tokyo can deploy quickly if yen weakness accelerates further before the Bank of Japan’s July 30-31 policy meeting.
This article was written by Eamonn Sheridan at investinglive.com.