Japan Officials Emphasize Stable FX Moves Reflecting Fundamentals Amid Yen Volatility

Japanese officials, including Economics Minister Minoru Kiuchi and Chief Cabinet Secretary Minoru Kihara, emphasize the importance of foreign exchange (FX) movements reflecting economic fundamentals and maintaining stability to avoid rapid, short-term fluctuations. The weak yen, while raising domestic inflation through higher import costs and potentially reducing purchasing power, benefits the economy by boosting exporters' profits and domestic capital expenditure. The Bank of Japan's ultra-loose monetary policy from 2013 to 2024 caused significant yen depreciation, but its recent policy adjustments have provided some support to the currency. Political dynamics, such as opposition to interest rate hikes and the coalition government's influence, add complexity to Japan's fiscal and monetary policies, affecting the yen's value and market expectations. The government is actively monitoring the yen's rapid fluctuations and plans to address inflation's impact on living costs through economic measures. Overall, the yen's movements are shaped by a combination of central bank policies, bond yield differentials with the US, risk sentiment, and political factors, with Japanese authorities seeking to manage volatility and ensure FX rates align with economic realities.