Yen breaches the 160 level again! Japanese finance minister vows to "join forces" with the US Treasury to address unilateral volatility

According to information from Zhihui Finance APP, Japanese Finance Minister Kazuki Katayama stated that after the yen briefly fell below a key threshold, Ministry of Finance officials will continue to closely cooperate with their counterparts in Washington and take appropriate action against unilateral and rapid fluctuations in the foreign exchange market when necessary.

On Friday, Katayama told reporters, "What we are currently seeing are sharp, one-sided movements in the foreign exchange market," and "We will continue to work closely with the U.S. Department of the Treasury and respond appropriately."

Katayama made these remarks after the yen briefly fell below the key psychological threshold of 160 yen per U.S. dollar during the New York trading session on Thursday. This break once again sparked market speculation that Tokyo might intervene multiple times in the foreign exchange market to support its currency, as it did earlier this year.

The yen has been under pressure due to the significant interest rate gap between the U.S. and Japan—the Bank of Japan's benchmark rate is 1.25%, more than 2.5 percentage points lower than the Federal Reserve's.

Katayama reiterated that Japan and the United States maintain a consistent stance on exchange rate issues, and noted that U.S. Treasury Secretary Scott Besant has repeatedly expressed a preference for a strong yen that reflects economic fundamentals. She added that both countries’ leaders also shared this view at the summit.

Katayama also stated that she does not see an issue with the difference in the amounts used by Japan and the U.S. during their joint intervention in the currency market on July 31. The U.S. disclosed that the New York Fed bought 79.4 billion yen by selling euros in the spot market, while Japan's purchases exceeded 5.5 trillion yen.

In addition, Katayama said it is still too early to comment on the national defense spending plan. Earlier, Japanese media reported that the government might consider formulating a five-year budget of 50 to 60 trillion yen starting from fiscal year 2027. According to the report, Prime Minister Sanae Takaichi remains cautious about implementing substantial tax increases as food sales tax is scheduled to be reduced from April 2027.

Japan is revising its key national security document by the end of the year, a process expected to reveal the scale and pace of defense spending increases in the coming years. Takaichi has already advanced the goal of raising defense spending to nearly 2% of GDP to the fiscal year ending in March, moving the target up two years ahead of the original schedule.

Earlier local media reports suggested that Japan is considering raising its five-year defense budget to 80 trillion yen, with part of the increase possibly funded by raising corporate taxes.

Katayama stated, "Discussions are still ongoing regarding what capabilities Japan should strive to acquire over the next five years, and specifically what needs to be strengthened to adapt to new forms of warfare."