Japan’s MOF official says expects BoJ to steer policy aligned with economy, not influenced by US

A senior official from Japan's Ministry of Finance stated on Tuesday that the Bank of Japan (BoJ) intends to steer monetary policy aligned with the economy, rather than being influenced by the United States. While declines to comment on recent forex shifts, the official did discuss currency intervention during a bilateral meeting with Bessent.

The meeting also touched on Japan's fiscal policy and the latest joint FX intervention. At the time of writing, the USD/JPY pair was up 0.03% at 159.80. The Japanese Yen's value is primarily determined by the performance of the Japanese economy, but also influenced by the Bank of Japan's policy, the yield differential between Japanese and US bonds, and trader risk sentiment.

The BoJ's mandate includes currency control, making its moves crucial for the Yen. The Bank of Japan has occasionally directly intervened in currency markets, typically to lower the Yen's value, although doing so sparingly due to concerns over its main trading partners. The BoJ's ultra-loose monetary policy from 2013 to 2024 caused the Yen to depreciate against its main currency peers due to a widening policy divergence between the Bank of Japan and other central banks.

Recently, the unwinding of this ultra-loose policy has given some support to the Yen. The BoJ's decision in 2024 to gradually abandon the ultra-loose policy, combined with interest-rate cuts in other major central banks, is narrowing the differential between the 10-year US and Japanese bonds, which has favored the US Dollar against the Japanese Yen.

The Japanese Yen is often considered a safe-haven investment, meaning that during market stress, investors are more likely to invest in the Japanese currency due to its perceived reliability and stability.