As the yen weakened and bond yields soared, Japanese Prime Minister Sanae Takaichi again issued a warning to the financial markets, saying that the government was ready to take action.
“As prime minister, I should not comment on matters that should be determined by the market, but we will take all necessary measures to deal with speculative and highly abnormal market fluctuations,” she said during a TV debate among party leaders on Sunday.
Koike did not specify whether her comment referred to Japanese government bond yields or the yen exchange rate. Recently, government officials have repeatedly issued warnings about both of these markets.
Speculation is rife that the Japanese authorities may be preparing to enter the foreign exchange market to stem the yen’s depreciation, and may even receive rare assistance from the United States. On Friday, the yen’s exchange rate against the US dollar once dropped to 159.23, but then rebounded sharply.
Traders said the New York Federal Reserve Bank has contacted several financial institutions to inquire about the yen exchange rate. Wall Street believes that these inquiries might be paving the way for Japan to intervene in the yen exchange rate, and the US government might also be involved.
A representative of the Federal Reserve Bank of New York declined to comment. A representative of the US Treasury Department did not immediately respond to a request for comment. On the issue of exchange rates, the Federal Reserve has always followed the instructions of the US Treasury Department.
Such checks usually serve as a warning to traders, indicating that the authorities believe the yen trading is excessive and are prepared to intervene in the market themselves to influence its price. Such checks typically occur when market volatility intensifies and verbal warnings have failed to effectively curb the fluctuations.
The head of Japan’s monetary policy, Atsushi Saito, said that the Tokyo authorities will closely coordinate with their counterparts in Washington and respond appropriately to fluctuations in the foreign exchange market as needed.
“We will continue to respond appropriately to exchange rate fluctuations and cooperate closely with the US authorities as needed, in line with the joint statement issued by the finance ministers of Japan and the United States last September,” Mitsuura said to reporters as he arrived at the Ministry of Finance on Monday morning.
Miyazawa also said that he had “no intention” of responding to market rumors that officials conducted a currency check when the yen suddenly rose on Friday. He emphasized that he had “no intention” of responding to such rumors. Previously, Finance Minister Masahiro Kawai said on Friday that the authorities were closely monitoring the currency trend with a sense of urgency.
The yen rose in New York on Friday after its exchange rate fluctuated sharply within an hour following a press conference by Bank of Japan Governor Kikuo Ito. Ito’s policy board had earlier announced that it would keep the benchmark interest rate unchanged. Japanese Prime Minister Sanae Takaichi also commented on Sunday, saying that Japan would “take all necessary measures to deal with speculative and highly abnormal market fluctuations.”
“Neither the US authorities nor the Japanese authorities seem to be satisfied with the current exchange rate of the yen,” said Jason Furman, a Harvard University economics professor who served as chair of the Council of Economic Advisers under former US President Barack Obama. “Everyone is on high alert for any factor that might change the yen’s exchange rate.”
In 2024, when the yen-to-dollar exchange rate dropped below 160, the Japanese authorities intervened four times, spending nearly 100 billion US dollars to purchase yen. This move set a rough boundary, and market participants believe that the Ministry of Finance of Japan may still intervene again in the future.
In September 2025, finance officials from the United States and Japan reaffirmed in a joint statement their fundamental commitment to letting markets determine exchange rates rather than intervening to gain competitive advantage. However, they also reserved the right to intervene in specific circumstances, which is consistent with previous statements, and stated that intervention should be limited to addressing excessive volatility or disorderly movements in currency markets.
