Japan's Kato and US's Yellen Discuss Yen's Slide

Japan's Finance Minister Katsunobu Kato met with US Treasury Secretary Janet Yellen on Thursday to discuss the recent depreciation of the yen. The bilateral meeting comes after Kato ramped up warnings over the rapid slide in the yen, which has reached almost a three-month low. The yen was trading at around 151.76 against the dollar early Friday in Tokyo, after hitting 153.19 earlier in the week.


The depreciation of the yen impacts Japan's export-driven economy, as it makes Japanese goods more expensive for foreign buyers. This can lead to a decrease in exports and a potential slowdown in economic growth. Additionally, a weak yen increases the cost of importing raw materials, which can hurt households and retailers.

US interest rate policies play a role in the yen's recent slide. The solid US data has diminished market expectations of aggressive interest rate cuts by the Federal Reserve, leading to a stronger dollar and a weaker yen. Japan has already spent more than $100 billion propping up the currency this year, and securing tacit agreement from the US is seen as strongly desirable if Japan decides to intervene in the market again.


Japan's intervention in the foreign exchange market can influence global currency dynamics. If Japan decides to intervene to support the yen, it could lead to a strengthening of the yen and a weakening of the dollar. This could have implications for global trade and investment, as well as for other currencies.

If Japan decides not to intervene, the yen could continue to depreciate, leading to potential consequences such as a decrease in exports, increased inflation, and a slowdown in economic growth. However, not intervening could also help Japan maintain its competitive edge in global markets.

The recent warnings and the US-Japan meeting could influence market sentiment and future currency interventions. The meeting signals Japan's stronger urgency over the yen and its willingness to work with the US to address currency movements. This could lead to a more stable exchange rate and a decrease in volatility.

The Bank of Japan (BOJ) could play a role in coordinating with the US Treasury to stabilize the yen. The BOJ's ultra-loose monetary policy and signals from Governor Kazuo Ueda that he will be in no rush to raise interest rates from current near-zero levels are perceived by markets as contributing factors to the yen's weakness. If the BOJ and the US Treasury work together, they could help to stabilize the yen and prevent further depreciation.