TOKYO, April 3 — Japanese Finance Minister Satsuki Katayama has put currency traders on notice, saying the government stands ready to act against speculative moves in foreign exchange markets as volatility has risen "significantly."
The yen, trading near the psychologically key 160-per-dollar mark, lingered at levels that have repeatedly stoked concerns of market intervention, underscoring growing unease in Tokyo over the speed and scale of its decline.
"We are seeing a rise in speculative activity in both crude oil futures and foreign exchange markets, and volatility has increased significantly," she said during a regular media conference today.
Katayama has previously flagged speculative activity, but her latest comments highlight growing concerns among authorities as currency markets turn increasingly volatile.
"As exchange-rate volatility driven by these developments is affecting the livelihoods and economy of the public, we are prepared to respond fully on all fronts," she said.
Traders say markets are nervous about a possible yen-buying intervention by Tokyo, especially after Japan's top currency diplomat Atsushi Mimura issued his strongest warning yet of action on Monday (March 30).
Still, many doubt the firepower of any intervention at a time when geopolitical turmoil in the Middle East is fuelling relentless demand for the safe-haven dollar. Since the United States (US) and Israel launched their war on Iran, the yen has slid about 2.3 per cent against the US dollar.
It was fetching 159.52 per dollar in afternoon trade.
"Mimura, who is the key person to decide on intervention, made note of that move around 160. If intervention happens, I would start to short the yen, but timelines are uncertain, and it depends on whether the US Fed would follow on that move or not," said Simplex Asset Management's Tokyo-based fund manager Toshinobu Chiba.
Others expect Tokyo to hold off for now. ANZ's Japan FX and commodities sales director Hiroyuki Machida said the authorities were unlikely to step in unless the yen weakens beyond 161-162 per dollar — territory last defended in July 2024.
"They will probably want to wait for the Bank of Japan's next policy meeting (from April 27 to April 28). If the BOJ raises rates and the yen recovers, then there would be no need to intervene.
"If the yen starts to weaken again after that, authorities could intervene," he said.
When asked about the Bank of Japan's monetary policy outlook, Katayama said decisions on specific measures rest with the central bank, declining further comment.
Bank of Japan Governor Kazuo Ueda told the Parliament on Monday that policy is not set on the basis of exchange rates, but acknowledged that currency moves have a powerful impact on growth and prices - remarks widely seen as laying the groundwork for an April rate hike.
Speaking in Parliament after the briefing, Katayama broadened the warning, saying authorities were also closely watching the bond market after 10-year JGB yields touched a near-three-decade high.
"We will keep a close watch on developments in bond market volatility and respond firmly through a coordinated set of fiscal and monetary policies," she said.
