The Japanese Finance Minister continued to strongly warn as the Yen fell to 155 JPY/USD, in the context of information about a larger-than-expected economic support package, raising concerns that Prime Minister Sanae Takaichi's preferential stimulation stance could slow down the Bank of Japan (BOJ) to raise interest rates.
The foreign exchange market is seeing excessive fluctuations and happening too quickly in one direction, Finance Minister Satsuki Katayama told reporters on Tuesday. I am really concerned about the current situation.
She said the government is closely monitoring any signs of unusual fluctuations or disruptions in the currency market. The Yen is currently trading around 155.20 JPY to exchange for 1 USD, narrowing the previous decline slightly.
Katayama's warning comes as the Yen slid above the key psychological threshold of 155 JPY to 1 USD overnight, raising market concerns about the possibility of government intervention to prevent the domestic currency from weakening further. The Yen also surpassed 180 JPY/EUR in the session, to its lowest level since the euro was put into circulation in 1999.
The latest devaluation of the Yen partly reflects growing concerns that Prime Minister Sanae Takaichi's upcoming economic support package, along with additional funding for the package, could bulge beyond expectations thereby making the Bank of Japan (BOJ) more cautious in its rate hike roadmap. Katayama said the support package had been somewhat larger by now, but declined to disclose details.
Japanese media reported last weekend that the support package could reach about 17 trillion yen (109 billion USD), with an additional budget of about 14 trillion yen.
Ms. Katayama also said that gathering a large-scale stimulus package is reasonable, as the Japanese economy recorded the first quarter of decline after six consecutive quarters of growth in the July-September period.
Some people think the data is not as bad as previous bad scenarios, she said, citing the increase in consumption and investment compared to the previous quarter. However, exports have declined due to US tariffs, so there is clearly reason to take economic support measures.
Moreover, covering costs will almost certainly require the issuance of more government bonds, increasing the already huge debt burden of the world's most heavily developed debt economy. fiscal concerns have also boosted Japanese bond yields this week, especially in the super long term a development that could reduce demand ahead of the 20-year bond auction on Wednesday.
Minister of Growth Strategy Minoru Kiuchi, who is in charge of developing the package, said on Tuesday that the government will continue to closely monitor yield developments.
Also on Tuesday, Prime Minister Takaichi is expected to meet BOJ Governor Kazuo Ueda. Investors are waiting to see if she will adjust her tone regarding the BOJ's view on raising interest rates.
