Japan's Katayama says will consider measures for stable funding, maintaining fiscal sustainability

Japanese Finance Minister Satsuki Katayama stated on Tuesday that the government is currently evaluating measures to ensure stable funding and maintain fiscal sustainability. She emphasized that there are no decisions made regarding the expected increase in defense spending. The USD/JPY pair saw a slight increase of 0.04% on the day, trading at 158.55.

The Japanese Yen (JPY) is one of the world's most traded currencies, whose value is influenced by the performance of the Japanese economy, the Bank of Japan’s policy, the difference between Japanese and US bond yields, and trader risk sentiment, among other factors. The Bank of Japan (BoJ) has the mandate to control currency, and its actions can significantly impact the Yen's value.

The BoJ has occasionally directly intervened in currency markets to lower the Yen's value, but usually refrains from doing so due to political concerns among its major trading partners. The ultra-loose monetary policy between 2013 and 2024 led to a depreciation of the Yen against its main currency peers due to increasing policy divergence between the Bank of Japan and other central banks, particularly the US Federal Reserve.

This gap has narrowed recently due to the gradual abandonment of the ultra-loose policy by the BoJ and interest rate cuts in other major central banks. The Yen is often considered a safe-haven investment, meaning that in times of market stress, investors tend to buy more of the Japanese currency due to its perceived reliability and stability.