Japan’s Katayama says joint FX statement with US persists, will act against disorderly moves

Japanese Finance Minister Satsuki Katayama affirmed on Monday that the Joint FX statement with the United States remains in effect, and the government will take action against disorderly market moves. She emphasized the importance of precisely estimating tax revenue and maintaining transparency. The Joint FX statement with the US persists, and the government will act against disorderly moves.

PM Takaichi noted that an undervalued yen poses problems, and it is crucial to maintain stable FX markets. Current levels are neither good nor bad, but conditions have improved compared to previous periods. The focus should be on avoiding chaotic fluctuations. The USD/JPY pair has risen by 0.14% on the day, reaching 157.80. The Japanese Yen is one of the world's most traded currencies, with its value influenced by various factors such as the performance of the Japanese economy, the Bank of Japan's policy, the differential between Japanese and US bond yields, and risk sentiment among traders.

The Bank of Japan is responsible for currency control, and its moves are crucial for the Yen's value. The Bank of Japan's ultra-loose monetary policy between 2013 and 2024 contributed to the Yen's depreciation against its main currency peers due to increasing policy divergence between the Bank of Japan and other central banks. Recently, the gradual unwinding of this ultra-loose policy has provided support to the Yen.

Over the past decade, the Bank of Japan's stance of maintaining ultra-loose monetary policy has widened the policy divergence with other central banks, particularly the US Federal Reserve. This supported the widening differential between the 10-year US and Japanese bonds, favoring the US Dollar against the Japanese Yen. The BoJ's decision in 2024 to gradually abandon the ultra-loose policy, along with interest rate cuts in other major central banks, is narrowing this differential.

The Japanese Yen is often considered a safe-haven investment, meaning that in times of market stress, investors tend to allocate more funds to the Japanese currency due to its perceived reliability and stability. Turbulent times are likely to strengthen the Yen's value against other currencies perceived as riskier investments.