Japan considers FX move as yen drops 7% over three months

The yen has tanked to 154.79 per dollar, the weakest it’s been in over nine months, and now Japan’s top financial regulators are huddling in Tokyo wondering if it’s time to jump in.

The yen’s crash (7% in just three months) came after Sanae Takaichi became prime minister and made it clear she’s all-in on boosting growth, not tightening policy.

That means no rush to hike interest rates, which leaves the currency wide open to more losses. And when the Bank of Japan drags its feet, it’s the government that has to consider stepping in.

BoJ officials are already tossing out signals, saying they’re “monitoring markets closely,” which is usually step one before a direct intervention. But it’s not just about hitting a certain number.

Japan also has signed on to global rules that say the market should set exchange rates. Still, the G20 makes space for action when markets get messy.

According to Bloomberg, Tokyo is watching for disorderly moves to decide when to act, but right now, things are looking messy enough.

Japan’s cheap yen hits home, triggers fresh political heat

The weak yen might be a win for tourists and exporters, but it’s killing local households and small businesses. Japan depends on imported energy and raw goods. When the currency sinks, the costs rise.

That’s inflation in plain sight. Food, fuel, electricity; all more expensive. And people aren’t getting raises to match it. This squeeze already helped push out two prime ministers before Takaichi. If things keep going this way, she’ll be walking a tightrope too.

There’s also heat from across the Pacific, as US president Donald Trump has been ripping into Japan, claiming the weak currency gives its companies an unfair edge in trade. That same argument came up again in recent talks between Tokyo and Washington.

If the slide continues, Japan might intervene. That decision comes from the Finance Ministry, and the Bank of Japan carries it out through selected commercial banks.

The plan? Buying yen, dumping dollars. How big and how fast depends on what kind of reaction they want. To fund it, they’ll tap into foreign reserves.

By end of October, Japan held around $1.15 trillion, mostly in cash and U.S. Treasuries. Last year, they even sold off some Treasuries to cover intervention costs when the yen hit 160.

Finance Minister Satsuki Katayama told parliament on Wednesday that they’ve seen “one-sided, rapid currency moves” and warned that “the negative aspects of the weak yen are becoming clearer.”

Satsuki also stressed that the Japanese government is watching “with a high sense of urgency,” and a level of concern that hasn’t been public since July 2024 when Japan’s government burned through nearly $100 billion intervening in the yen’s crash. Every time the yen touched 160, action followed.

But they don’t always admit they’ve stepped in, and that’s part of the game. The ministry usually confirms the total spending at the end of each month.

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