Japanese Prime Minister Sanae Takaichi said on Sunday that Tokyo will take necessary measures to counteract speculative or very abnormal market moves, responding to renewed volatility in the yen and government bond markets.
Takaichi declined to discuss individual market moves when asked about the recent sell-off in Japanese government bonds and the yen's depreciation, saying on a television programme aired by Fuji Television: "I won't comment on specific market moves." She added: "The government will take necessary steps against speculative or very abnormal market moves." She did not provide further details.
The remarks came after the yen, which had weakened to near the psychologically important 160 to the dollar, rallied suddenly on Friday. That jump followed rate checks conducted by the New York Federal Reserve, an action some traders interpreted as increasing the likelihood of joint intervention by the United States and Japan to stop the currency's slide.
Market participants have recently pushed up yields on Japanese government bonds amid worries that Takaichi's expansionary fiscal agenda combined with the Bank of Japan's slow pace of interest rate increases could prompt additional debt issuance and spark higher inflation. The rise in bond yields raises the cost of servicing Japan's large public debt, a dynamic cited by government and market observers as a source of concern.
A weak yen has also become problematic for policymakers because it boosts import prices and contributes to broader inflation, squeezing households' purchasing power. In response to rising living costs, Takaichi has put together a substantial spending package and pledged to suspend an 8% levy on food sales for two years. That fiscal support package has itself been linked with the uptick in bond yields.
Investors and traders remain watchful for any follow-up from the government or central bank as markets digest both the fiscal moves and recent currency swings. At the same time, market signals such as sudden currency rebounds and higher sovereign yields continue to feed discussion about the appropriate policy mix for containing inflation while managing fiscal financing pressures.
Context and market implications
- Recent bond yield spikes reflect concerns about increased debt issuance tied to expansionary fiscal measures.
- The yen's sharp movements have raised speculation about possible coordinated intervention to stabilize the currency.
- Rising import costs from a weaker yen are pressuring household budgets and amplifying inflationary dynamics.