Amid the dilemma of yen depreciation, the Japanese prime minister emphasized that the government's attitude has changed

The market is in turmoil. Japanese Prime Minister Sanae Takaichi made a rare statement on a Fuji TV program, saying that the government would not sit idly by about abnormal market behavior. Behind this statement is a delicate balance between the pressure on the yen’s depreciation and policy expectations - the prime minister did not speak outright about intervention, but clearly promised to take action if necessary.

The depreciation of the yen intensified, and the government’s attitude gradually changed

The sharp change in the yen against the dollar has triggered sensitive nerves in the market. Sanae Takaichi emphasized that the government will take necessary measures against speculative or abnormal market behavior. This remark seems conservative, but in fact it sends a signal: the government is no longer passive in the long-term problem of the depreciation of the yen. She deliberately avoided commenting on specific market volatility data, but the signal of a shift in attitude to active management has been released.

The market’s interpretation of the government’s policy stance is heating up. Expansionary fiscal policy and the Bank of Japan’s relatively slow rate hike process have combined to push up government debt and inflationary pressures. This combination not only aggravates the dilemma of yen depreciation, but also makes the market have higher expectations for possible market intervention by the government.

The 160 mark has been broken, and the possibility of joint intervention between the United States and Japan has emerged

A pivotal moment has emerged in 2024. When the yen fell below the psychological mark of 160 against the dollar, the Federal Reserve Bank of New York conducted an exchange rate check. This move has sparked new speculation among traders about the possibility of joint intervention between the United States and Japan.

Subsequently, the yen exchange rate rebounded rapidly. Although this rebound is limited, it fully shows that market expectations for joint government intervention have formed. Once the signal of intervention between the two sides is clear, the speculative selling in the market will converge because of the risk. Sanae Takaichi’s latest statement is warming up for this possible joint action.

The market game behind the policy posture

The depreciation of the yen involves policy trade-offs at multiple levels. The government must both deal with market speculation and find a balance between fiscal and monetary policy. Sanae Takaichi’s cautious remarks actually reflect the complexity of this dilemma.

Not directly intervening, but hinting that it will take action, is a clever move of the government in the management of market expectations. By releasing policy signals rather than direct action, market expectations for yen depreciation can be changed before it can be fully moved. This policy communication strategy is often more stable than the real intervention itself.