Japan's Finance Minister Warns of Yen Weakness, Calls for Stable Exchange Rates

Japan's Finance Minister Katsunobu Kato expressed concern over the yen's depreciation to levels last seen in March, following the Bank of Japan's dovish message on interest rates. Kato emphasized the importance of stable exchange rates reflecting economic fundamentals. Some strategists warned of the risk of the yen falling to 155 against the dollar, prompting speculation of potential intervention by authorities.

Japan's Finance Minister Katsunobu Kato has voiced his concerns over the recent depreciation of the yen, which has fallen to levels not seen since March. This depreciation followed the Bank of Japan's (BOJ) dovish message on interest rates, which has led to speculation about potential intervention by authorities to stabilize the currency.

The yen hit a four-month low of 150.89 against the dollar on Friday, August 1, according to Reuters [1]. Finance Minister Kato emphasized the importance of stable exchange rates that reflect economic fundamentals. He stated, "It's important for exchange rates to remain stable, reflecting economic fundamentals," during a press conference [2].

The BOJ's decision to leave interest rates unchanged has been seen as a dovish stance, which has contributed to the yen's weakness. Bank of Japan Governor Kazuo Ueda said that current foreign exchange levels are unlikely to have an immediate major impact on the inflation outlook, suggesting a degree of tolerance for the yen's current weakness [1].

Some strategists have warned that the yen could depreciate further, potentially reaching 155 against the dollar. Marito Ueda, general manager of market research department at SBI Liquidity Market, stated, "If the BOJ is not going to raise rates, there is a possibility that the yen could fall to 155, and then intervention is the only option left" [2].

The yen declined about 4.5% in July, defying its seasonal trend as domestic political uncertainties and tariffs weighed on the currency. The recent trade agreements between Japan, the EU, and the US have helped reduce uncertainty surrounding trade policy, but the finance minister emphasized the need to continue monitoring the impact of new tariffs [2].

In summary, Japan's Finance Minister Katsunobu Kato has expressed concern over the yen's depreciation, and some strategists have warned of further potential depreciation to 155 against the dollar. The BOJ's cautious approach to interest rates has contributed to this weakness, and authorities may consider intervention if the yen continues to depreciate.

References:
[1] Reuters. (2025, August 1). Japan alarmed over recent FX moves, its finance minister says. Retrieved from https://www.reuters.com/markets/asia/japan-alarmed-over-recent-fx-moves-its-finance-minister-says-2025-08-01/
[2] Bloomberg. (2025, August 1). Japan's Kato voices concern with yen at weakest since March. Retrieved from https://www.bloomberg.com/news/articles/2025-08-01/japan-s-kato-voices-concern-with-yen-at-weakest-since-march