Japanese Prime Minister Fumio Kishida faces exchange rate crisis, government intervention becomes the focus

Japanese Prime Minister Sanae Takaichi recently responded to market concerns about the Japanese economy during an interview with Fuji Television. She emphasized that the government would not comment on specific market fluctuations one by one but admitted that necessary measures would be taken against any speculative or abnormal market behaviors. This statement implied that the Japanese government is closely monitoring the current economic situation.

Market Anxiety Triggered by Fiscal Expansion and Central Bank Policies

The expansionary fiscal policies implemented by the Japanese government, combined with the Bank of Japan’s relatively slow pace of interest rate hikes, have created a contradiction. The market fears that this policy mix will force the government to increase debt issuance and potentially raise inflation rates. As these concerns spread, the yen exchange rate began to fluctuate dramatically, and investor confidence in the Japanese economy was noticeably shaken.

Sharp Yen Decline and the Possibility of U.S.-Japan Joint Intervention

After the yen-to-dollar exchange rate fell below 160, the New York Federal Reserve immediately conducted a currency check. Market analysts widely interpreted this move as a signal that the U.S. and Japan might intervene jointly in the currency market. This expectation quickly spread among traders, prompting a large influx of capital into the yen market.

Intervention Effects Manifest, Rapid Yen Adjustment

Following the Federal Reserve’s action, the yen exchange rate rebounded quickly. This reaction confirmed the market’s high sensitivity to government intervention. Although the Japanese Prime Minister stated that he would not over-comment on market fluctuations, actions at the government level have already sent a clear signal to the market, indicating that the Japanese government will closely monitor exchange rate movements and will not hesitate to intervene if necessary. In the current policy environment, every move by the Prime Minister and relevant departments can influence market expectations.