Tokyo Steps In: Japan Intervenes in Foreign Exchange Market

Japanese authorities have intervened in the foreign exchange market to support the yen, which had fallen to its weakest level in nearly four decades. The currency strengthened from a low of 163.86 against the dollar on Tuesday to around 158.70 on Friday, gaining more than 5 yen in three days.

The Japanese Finance Minister, Satsuki Katayama, declined to confirm whether authorities had entered the market but said the government was maintaining a high level of vigilance. US Treasury Secretary Scott Bessent described the yen as 'very undervalued' and expressed concerns about excessive volatility in the currency.

The intervention comes amid safe-haven demand for the dollar due to the Middle East conflict and concerns that Japanese Prime Minister Sanae Takaichi's expansionary fiscal policies could worsen the country's public finances. A weaker yen supports Japanese exporters by increasing the value of overseas earnings, but it also raises import costs for energy, food, and raw materials.