Japan's Finance Minister Katsunobu Kato stated that the government maintains the same level of urgency regarding the foreign exchange market as it did when coordinating action with the United States. She emphasized that stabilizing financial markets, including the dollar-yen pair, is crucial not only for Japan's economy but also for global economic stability.

Kato made these remarks following a meeting with Prime Minister Takaichi Sanae, during which she briefed the Prime Minister on her recent participation in an international conference in North Carolina. The Finance Minister indicated that the government's fundamental stance on the currency market remains aligned with the Prime Minister's policy considerations, signaling that Tokyo's alertness to abnormal yen fluctuations has not diminished despite prior actions.

This statement comes amid sustained market attention on whether Japan might intervene again to curb excessive yen depreciation, as well as on the US government's attitude towards Japan's currency and monetary policies.

Intervention Stance Shows No Significant Softening

Kato noted that she has maintained the same sense of urgency since Japan and the US coordinated their foreign exchange actions. From a policy signal perspective, this does not imply that the government has decided to re-enter the market, but rather indicates that the Ministry of Finance still views currency volatility as a matter requiring close attention.

Historically, Japanese officials have focused more on the "speed" of currency movements and whether they deviate from economic fundamentals, rather than specific exchange rate levels. Should the yen experience sharp, one-sided depreciation in a short period, the likelihood of verbal intervention or actual market action would correspondingly increase.

For Japan, excessive yen weakness carries clear dual implications. On one hand, a weaker yen boosts the converted value of overseas revenue for exporters and supports profits for some manufacturers. On the other hand, given Japan's heavy reliance on energy and raw material imports, sustained yen depreciation raises import costs, which then feed through to food, energy, and other essential goods prices.

With domestic inflation already a major concern for households and the government, exchange rate stability has effectively become more than just a financial market issue—it is closely tied to purchasing power, consumption, and the government's economic policy objectives.

Kato particularly stressed that stability in financial markets, including the dollar-yen rate, is vital not only for Japan but also for the global economy. This echoes the core position Tokyo has maintained in recent years: the government's focus is not on simply pursuing yen appreciation, but on preventing excessive volatility that diverges from fundamentals.

Kato Denies Bessent Pressured Japan on Rate Hikes

Beyond currency matters, another recent market focus has been US Treasury Secretary Scott Bessent's stance on Japanese economic policy. Market participants had previously interpreted some of Bessent's remarks on Japan's monetary and inflation policies as indicating US pressure on the Bank of Japan to raise rates further, thereby supporting the yen and addressing the persistently high dollar-yen levels.

However, Kato notably downplayed such interpretations. She stated that during Bessent's visit to Tokyo in May, he made no policy demands of her. When asked about Bessent's comments suggesting Japan should abandon its "reflationary policy," Kato clarified that Bessent never told her what Japan "must do" or "must stop doing."

This response is significant because it distinguishes between two different aspects: US officials may publicly express views on Japan's economic policy, inflation, or currency trends, but that does not mean the US government has formally requested the Bank of Japan to raise rates or demanded changes to Japan's existing economic policies.

In essence, Kato aimed to emphasize that Japan's fiscal and monetary policies remain decisions made by Japan itself based on domestic economic and price conditions, rather than direct responses to policy demands from the US.