Japan is Ready to Take Firm Steps to Deal with Yen Exchange Rate Volatility

ILLUSTRATION UNSPLASH/Cullen Cedric

JAKARTA - The Japanese government is ready to take "firm" steps against currency exchange rate movements if necessary in accordance with an agreement with the United States.

The statement was made by Japanese Finance Minister Satsuki Katayama after holding an online talk with US Treasury Secretary Scott Bessent the day before.

As reported by ANTARA from Kyodo, Tuesday, June 23, Katayama said the joint statement of Japan and the United States on exchange rate policy remains a guideline for both countries.

According to him, both parties agreed that intervention in the foreign exchange market would only be carried out to overcome volatility as well as irregular weakening or strengthening of the currency. The statement came as the yen exchange rate approached a historic low against the US dollar.

At one point, the yen traded at a high of 161 yen per dollar, sparking speculation that Japanese authorities could again intervene to hold back the weakening of their currency.

"We had constructive talks amid various developments in the global economic environment, and I feel that our views are very in line," Katayama told reporters at the Japanese Ministry of Finance.

If the yen breaks through the level of 161.96 per US dollar, which was last recorded in July 2024, the Japanese currency will reach its weakest position since 1986.

The yen was still under selling pressure as markets expected the interest rate gap between Japan and the United States would not narrow in the near future.

The pressure is also influenced by expectations that the US central bank, the Federal Reserve, could potentially raise interest rates again this year.

Katayama explained that the talks with Bessent were not an emergency meeting, but a follow-up to the recent G7 summit held in France.

In addition to the exchange rate issue, the two ministers agreed to strengthen cooperation related to the use of artificial intelligence (AI) models that have advanced cyber security capabilities, including Claude Mythos developed by the US start-up company Anthropic.

According to Katayama, Japan and the US will coordinate in responding to concerns that highly sophisticated AI technology can be misused to launch cyber attacks. This concern prompted the developers of the technology to limit user access.