Japanese Yen: Policy support and intervention risk – BNY

BNY’s Bob Savage highlights that Japan’s government aims to strengthen the Japanese Yen by boosting long‑term competitiveness, while USD/JPY trades near 160. Authorities, including the Finance Ministry and BOJ, signal readiness to intervene and potentially raise rates if inflation risks rise. Strong wage growth and modestly softer household spending support policy normalization, even as foreign reserves fall after recent currency support.

Authorities lean toward stronger Yen

"Japan’s Prime Minister Sanae Takaichi said the government aims to strengthen the yen by boosting the economy’s long-term competitiveness through measures to encourage domestic investment, secure supply chains and raise growth potential."

"Finance Minister Satsuki Katayama reiterated that authorities are monitoring markets closely and stand ready to intervene again after reports that Japan recently spent more than USD 73bn supporting the currency."

"BOJ Governor Kazuo Ueda also signaled that further interest rate increases may be needed if inflation risks continue to rise."

"Supporting the case for policy normalization, April wage growth accelerated to 3.5% y/y while household spending fell only 0.5%, both stronger than expected."

"Meanwhile, Japan’s foreign reserves dropped by USD 77bn in May, reflecting the cost of recent currency intervention efforts."