Japanese Finance Minister Satsuki Katayama told reporters on Thursday that the timing for “decisive action” in the market was nearing.
Tokyo: Japan carried out its first official intervention in the currency market in nearly two years on Thursday, buying yen after it weakened past the 160 per dollar mark, and followed that up on Friday with a fresh warning that speculative positions remain in the market — putting traders on notice that more action could come at any time, including during the thinly-traded Golden Week holiday stretch.
Thursday: The warning and the move
Japanese Finance Minister Satsuki Katayama told reporters on Thursday that the timing for “decisive action” in the market was nearing. “I have been mentioning the chance of taking decisive action. I believe the timing for taking such decisive action is nearing,” she said. She then added, pointedly: “I advise all of you reporters to carry your smartphones at all times including during the holidays.”
Top currency diplomat Atsushi Mimura went further, describing moves in the market as “extremely speculative” and saying: “This is our final evacuation warning to markets.” When asked whether he was signalling imminent intervention, Mimura said: “I think market players would know what I mean.”
The yen moved almost immediately. It spiked after Katayama spoke, gaining more than one yen from around 160.60 per dollar within an hour. Hours later, Japan stepped in officially. Two sources familiar with the matter told Reuters that officials intervened to buy yen on Thursday after it hit 160.7 to the dollar, its weakest since July 2024. Central bank data published on Friday showed Japan may have spent as much as 5.48 trillion yen, approximately $35 billion, in the intervention — just shy of the $36.8 billion spent in the last round of intervention in July 2024.
Friday: More warnings, more volatility
On Friday, Mimura told reporters that speculative moves persist in markets, a clear signal that Tokyo remains ready to intervene again. When asked whether Tokyo could intervene during the holiday period, he said: “I won’t comment on what we’ll do ahead. But I will tell you that Japan’s Golden Week holidays have just started.”
The comments and a sudden jump in the yen sparked speculation among currency traders of another round of intervention. Having held steady overnight, the dollar dropped in the London morning, falling by as much as 0.66% to a session low of 155.60 from 157.12 earlier. Following Mimura’s remarks, the yen strengthened from around 157.1 per dollar to 155.49 before retreating to around 156.6 by the end of the European session.
After surging to 155.5 per dollar immediately after Thursday’s intervention, the yen trimmed some gains and stood at 156.99 by Friday evening, still well above the 160 mark seen as the authorities’ line in the sand.
US coordination confirmed
Japan remains in “extremely close contact” with the US, Mimura confirmed, adding that both countries agree that action may be needed depending on market developments. The reference to Washington is deliberate. It signals that any intervention is not unilateral and that Tokyo has at minimum informed the Americans of its intentions, consistent with the bilateral FX framework agreed last September.
The speculators’ position
Weekly data from the US market regulator showed speculators hold the largest bearish position in the yen since July 2024, worth nearly $7.5 billion. Nervousness was also reflected in the options market, where the cost of protection against big swings in the yen over the coming week neared its highest level in a month, according to LSEG data.
Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets, said: “Liquidity is thin and people are nervous after yesterday, so there is a susceptibility to volatility in the dollar/yen. Every time we see a substantial move in the yen there will be questioning about what is driving this given the warnings we have had.”
What is driving the Yen weakness
The yen has been under pressure from wide US-Japan interest rate differentials, and its weakness has been exacerbated by higher oil prices resulting from the Iran war, which have boosted the dollar. Even the BOJ’s hawkish signals at its Tuesday meeting failed to provide lasting support, as the dollar gained on market bets that mounting inflationary pressures will keep the US Federal Reserve from cutting rates.
Rinto Maruyama, FX and rates strategist at SMBC Nikko Securities, said: “The yen will remain under downward pressure on inflation concerns from high oil prices, slow BOJ rate hikes and the hawkish tone of other central banks.”
The BOJ kept rates on hold at 0.75% at its April meeting, passing by a 6-3 vote, with three board members dissenting in favour of a hike to 1.0%. The central bank raised its FY2026 core inflation forecast to 2.8% from 1.9%, while trimming its growth forecast to 0.5% from 1.0%.
Data released on Friday showed Japan’s core inflation slowed in April as government subsidies blunted the effect of energy prices, but analysts expect price gains to accelerate from here, keeping pressure on the central bank to hike rates sooner rather than later.
The golden week risk
Japanese markets will be closed on Monday through Wednesday for Golden Week, which analysts say could cause wild swings in the yen due to thin liquidity. This is precisely the scenario Tokyo fears — a period when a relatively small number of trades can move the currency sharply, inviting speculative attacks that are difficult to counter in real time.
Jordan Rochester, head of EMEA fixed income, currency and commodity strategy at Mizuho, noted that Japanese authorities carried out further currency interventions after an initial move in both 2022 and 2024, and that Friday’s yen move likely reflected further intervention. He added: “Longer term, unfortunately for Japan, the currency will remain under pressure the longer this war and blockade go on and oil remains strong. FX intervention will only get them so far.”
Mimura also flagged the possibility of Japan intervening in crude oil futures markets, given concerns that oil price volatility is spilling over into yen moves. “We have conditions in place and are always ready to take action,” he said. It is a rare signal, the idea of a government intervening in commodity futures, not just currencies, underscores just how seriously Tokyo is treating the current situation.
