Japan hints at intervention with US to counter currency weakness

The yen rose against the dollar on Friday after Japan's Finance Minister Satsuki Katayama said Tokyo would not rule out any options to counter weakness in the yen, including coordinated intervention with the US.

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The yen slid to a 1-1/2-year low earlier in the week. It was last up 0.37% to 158.08, but still set for a third consecutive week of declines against the greenback.

The dollar index, which measures the US currency against a basket of peers, was poised for a third consecutive weekly gain after positive US economic data pushed out expectations for rate cuts by the Federal Reserve.

Katayama said a joint statement signed with the US last September “was extremely significant and included language on intervention.”

Markets in Japan are on edge before a pivotal week that will see fiscally dovish Prime Minister Sanae Takaichi dissolve parliament to set up a snap election while the central bank meets on policy. Some Bank of Japan policymakers see scope to raise interest rates sooner than markets expect to contend with the weak yen, sources told Reuters.

The Japanese currency has fallen this week on expectations that Takaichi may have greater leeway to introduce more stimulus pending the snap election expected early next month.

“Lower house dissolution reports are fuelling JPY depreciation pressure and we have further extended our long USD/JPY target, but potential intervention risk could cap the upside,” said Shinichiro Kadota, Head of Japan FX and Rates Strategy at Barclays Tokyo.