Finally about to take action? Sanae Takaichi: The Japanese government is ready and will take "necessary" measures to intervene in the yen at any time.

Japanese Prime Minister Sanae Takaichi delivered a speech in parliament on Wednesday, stating that the government is ready and will strictly monitor the nature of exchange rate fluctuations, distinguishing whether they are driven by economic fundamentals or speculative behavior, and is prepared to take "necessary" action at any time. This tough stance comes as the US Thanksgiving holiday leads to reduced liquidity in foreign exchange markets, sparking heightened attention over possible intervention by Japanese authorities.

On November 26, according to media reports, in response to opposition lawmakers’ questions regarding the depreciation of the yen, Takaichi emphasized that the government is closely monitoring market fluctuations including government bond yields and exchange rates. She also defended her economic stimulus plan, saying it is not "reckless spending," and promised to work to reduce Japan’s debt-to-GDP ratio. She made it clear:

“For me, the most important thing is to ensure the sustainability of Japan’s public finances.”

From the market’s reaction, the prime minister’s verbal intervention had limited effect: the yen continued to fall rather than rise, with the yen trading at 156.38 to the US dollar, still above the key intervention threshold of 155.

Light holiday trading creates opportunity for intervention

It is worth noting that the Thanksgiving holiday closure in the US this Thursday and shortened trading on “Black Friday,” combined with Monday’s market closure in Japan, will create an ideal low-liquidity trading environment. Historical data shows that Japanese authorities tend to intervene during such periods to achieve more significant price impact with less capital. Analysts point out that this “cost-effectiveness” strategy has yielded notable results in previous interventions.

In Japan’s unique intervention mechanism, the Ministry of Finance is responsible for deciding when to intervene, while the central bank acts as the implementing body. Finance Minister Katsuki Katayama intensified verbal intervention last week, temporarily curbing yen depreciation. But as the dollar has continued to strengthen since October, the market is closely watching to see whether authorities will seize this “golden window” to turn verbal warnings into concrete action.

The key challenge facing Japanese authorities is how to effectively curb excessive yen depreciation without overusing foreign exchange reserves. This Thanksgiving holiday may mark an important turning point, witnessing whether the government shifts from verbal warnings to actual action.

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