Japanese Finance Minister Satsuki Katayama stated on Tuesday that Japan is maintaining close dialogue with the United States regarding foreign exchange movements, while markets remain highly alert to the possibility of joint intervention to support the yen.
At a regular press conference, Katayama noted, "Over the past four months, I have maintained close communication with U.S. officials, and our relationship has grown even stronger during this period." She added, "Given that both sides have responsibilities to protect, I believe we can say we are thoroughly carrying out our respective duties."
These remarks come as forex traders remain highly vigilant about potential market intervention. Exchange rate checks are widely seen as preparatory steps for currency intervention. At the end of January, the yen suddenly surged to the mid-155 range, which many in the market attributed to exchange rate checks by U.S. authorities, possibly in coordination with Japan.
The minutes from the January Federal Reserve meeting confirmed that the New York Fed conducted exchange rate checks on behalf of the U.S. Treasury. However, data later released by Japan's Ministry of Finance confirmed that the Japanese government was not involved in the yen's rise in January.
Exchange rate checks have sparked speculation about intervention. Katayama declined to comment on local media reports suggesting that exchange rate checks conducted by U.S. authorities last month were led by Treasury Secretary Scott Bessent.
According to Bloomberg, exchange rate checks are widely viewed as preparation for currency intervention, leading to heightened alert among forex traders about possible joint U.S.-Japan action to support the yen. The Fed's January meeting minutes, released last week, confirmed that the New York Fed conducted exchange rate checks for the U.S. Treasury.
In late January, the yen strengthened sharply after approaching the dangerous 160 level, rising to the mid-155 range. Market participants widely attributed this move to exchange rate checks by U.S. authorities, possibly coordinated with Japan. However, data later released by Japan's Ministry of Finance confirmed that the Japanese government did not participate in this yen appreciation.
The yen remains in a danger zone as markets continue to prepare for possible currency intervention, with the yen hovering near 160 against the U.S. dollar—a level not seen since July 2024, when the Japanese government supported the yen by selling dollars on a large scale. During Tuesday's trading, the USD/JPY pair stood at 155.08.
SMBC Nikko Securities economist Junichi Makino suggested that if the Japanese government decides to intervene by buying yen and selling dollars, the U.S. is unlikely to object, particularly given President Trump's recent comments interpreted as welcoming a weaker dollar.
Makino indicated that if intervention occurs, the yen could rebound toward its interest rate-based fair value, estimated at around 142 yen per dollar.
Regarding the U.S. Supreme Court's ruling on Trump-era tariffs, Katayama pledged to continue monitoring developments and ensure that Japanese investments in the U.S. proceed steadily.
President Trump is considering new national security tariffs following a Supreme Court decision that invalidated many tariffs from his second term.
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