Japan finance chief warns of action against disorderly yen swings

Katayama's statements keep the possibility of intervention in the background without indicating that any move is close, and the yen's decline during the session suggests markets see little near-term deterrence. Her unwillingness to assess current exchange rate levels, along with her observation that conditions have gotten better, appears as a wait-and-see stance rather than an intensification of verbal warnings. Referring to the joint statement with Washington reminds the market that Tokyo believes it has the authority to step in if currency moves turn chaotic, which could make traders more hesitant to push the yen sharply weaker in a short timeframe. A softer currency also raises import expenses at a time when Japanese manufacturers are already seeing stronger input price inflation.

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Katayama reminded markets that Tokyo still has the option of intervening, and that the US supports this, but gave traders no specific trigger point, and the yen fell regardless.

Summary:

• Japanese Finance Minister Satsuki Katayama said a shared foreign exchange statement with the United States remains active and that Tokyo will respond to disruptive currency moves
• She would not comment on particular exchange rate levels or say whether current levels are favourable or unfavourable
• Katayama noted that Prime Minister Takaichi has stated yen undervaluation is an issue, and emphasised the significance of stable markets
• She stated that conditions have improved relative to earlier, while reiterating the necessity of avoiding disorderly moves
• Katayama also promised to estimate tax revenue precisely and with greater openness
• The yen was trading lower during the session so far

Japanese Finance Minister Satsuki Katayama stated on Sunday that a joint foreign exchange statement with Washington remains active and that Tokyo will take measures against disorderly currency moves, maintaining the possibility of intervention while the yen fell.

Katayama would not comment on specific exchange rate levels and said she could not describe current levels as either favourable or unfavourable. She emphasised the importance of stable currency markets and the need to avoid disorderly swings. She also said conditions had improved compared with earlier without giving details.

The minister pointed out that Prime Minister Takaichi has described yen undervaluation as problematic, a signal that concern over the currency's weakness reaches the highest levels of government. Her reference to the joint statement with the US indicates that Tokyo views its intervention authority as something Washington accepts if moves become extreme.

The remarks stopped short of escalating Japan's verbal warnings. By not judging any levels and noting improved conditions, Katayama indicated vigilance rather than immediate action. The yen was softer during the session, indicating that markets did not see the statements as a strong deterrent.

The comments come as a weak currency increases cost pressures on Japanese firms. A manufacturing survey released on Monday showed input price inflation rising for the first time in five months, with companies attributing this to higher costs for oil, raw materials and components.

Katayama also addressed fiscal policy, promising that the government would make its best effort to estimate tax revenue accurately and with greater transparency. That pledge comes as parliament debates proposals to reduce the consumption tax on food and introduce a new income-based benefit for low-income workers, measures that have kept Japan's fiscal outlook under scrutiny.

The main test for markets will be whether yen weakness accelerates. Tokyo has tied any action to the speed and disorderliness of moves rather than to a specific level, so a sharp, rapid decline would be more likely to trigger intervention than a gradual slide.