Sanae Takaichi's intervention to 'cool down'—is the yen about to resume its downward trend?
The Japanese yen may continue its decline against the US dollar this week.
According to the latest Bloomberg report, this trend is mainly driven by two factors: first, the US dollar has shown stronger resilience; second, statements made by Japanese Prime Minister Sanae Takaichi over the weekend have made traders more certain that the likelihood of direct intervention by Japanese authorities to support the yen is decreasing.
When Takaichi spoke about exchange rates over the weekend, she first emphasized the positive impact of a weak yen on exports, saying, "A weak yen is a huge opportunity for the export sector, and it can also provide a cushion for the automobile industry against US tariffs," before turning to a more restrained tone.
She said she hopes to "build a strong economic structure that is resilient to exchange rate fluctuations."
Markets interpret this statement as lacking a strong signal of official support, and it may actually raise the threshold for direct official intervention to support the yen. According to reports, this has objectively weakened the previous effect of "verbal intervention" in curbing yen depreciation.
Traders generally believe that this may mean the threshold for authorities to implement potential support measures has already risen.
After Takaichi's statement, the yen fell further on Monday. At one point, the yen dropped 0.5% to the 155.51 level.
US-Japan policy signals resonate, yen once again exposed to fundamental pressures
In addition to Japan adopting a more cautious attitude, the US position has likewise failed to provide support for the yen.
Bloomberg notes that US Treasury Secretary Bessent stated clearly last week that the US prefers a strong dollar and, more importantly, the US government has not taken any action to support the yen.
Meanwhile, data released last Friday by the Japanese Ministry of Finance showed that as of January 28, Japan had not carried out any official foreign exchange intervention, further weakening market expectations for policy support.
In the absence of policy protection, the yen is once again exposed to its long-term structural pressures, including negative real interest rates and the expansionary fiscal policy stance advocated by Takaichi.
With elections approaching, market focus returns to whether there is any bottom line left
Analysis points out that the current USD/JPY exchange rate still has significant room before reaching the 160 level, commonly seen as a potential intervention trigger range, and in the absence of policy resistance, the possibility of the yen continuing its depreciation trend before the Japanese election is rising.
Political and policy signals on both sides of the Pacific point to one conclusion: In the short term, it is unlikely that US or Japanese governments will provide clear support for the yen.
In recent times, market expectations for official intervention have repeatedly been the key factor preventing the yen from falling to multi-year lows.
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