Yoshihiko Noda, who once served as Japan's finance minister and now co-heads the country's largest opposition party, told reporters that any government effort to buy yen would be of limited help in halting the currency's decline unless it had international backing. Noda argued that the only durable way to restrain the yen's depreciation is to convince markets that Japan is addressing its fiscal position and to ensure the Bank of Japan can raise rates free of political pressure.
Noda, who oversaw a rare, coordinated yen intervention with Group of Seven partners in 2011 when Japan faced an earthquake and tsunami, said the circumstances today are markedly different. "Even if Japan were to conduct currency intervention, it won’t be that effective unless Tokyo has the understanding of other countries," he said. "I’ve done it myself but back then, it was concerted intervention" to reverse a yen spike after Japan was hit by a massive earthquake and tsunami in March 2011, he added.
Markets have recently been jittery about the possibility of official intervention to buy yen following a sharp currency move on Friday that market participants attributed to so-called rate checks by the New York Federal Reserve and a public pledge by Prime Minister Sanae Takaichi to act against speculative moves. Some analysts see the Fed's rate checks - interpreted as a signal that authorities are prepared to step in - as indicating tacit Washington approval for measures to support the yen. But Japan historically seeks not just U.S. acquiescence, but broader consent from other G7 economies when it conducts interventions.
Political backdrop
Prime Minister Takaichi has called a snap general election for February 8 to secure a mandate for more expansionary fiscal measures. In opposition, Noda's Constitutional Democratic Party of Japan merged with Komeito to form the Centrist Reform Alliance (CRA) earlier this month, with Noda serving as co-head. The CRA is now the largest opposition party and is viewed as the principal challenger to Takaichi's ruling coalition.
Recent market behaviour - notably selling of Japanese government bonds and the yen - reflects investor concern that Takaichi's preference for looser fiscal policy, combined with a slow pace of interest-rate increases by the Bank of Japan, could necessitate further debt issuance and risk higher inflation. Those dynamics have stoked speculation about official measures to stabilise the exchange rate.
Noda's prescription
While Noda acknowledged the harm from steep yen depreciation - "excessive yen falls must be put to a halt as they hurt households by pushing up import costs" - he said intervention would not be a standalone remedy. Instead, he called for steps to reduce market anxiety over Japan's fiscal health. "Japan needs to be in crisis-management mode" given alarm signals from bond and currency selloffs, he said, noting markets are effectively sounding a "drumbeat of alarm bells" about the nation's fiscal situation.
To rebuild market confidence, Noda urged Tokyo to present a clearer plan to get its fiscal house in order and to shift emphasis toward tackling inflation. Part of that would involve reducing dependence on very loose monetary policy. Specifically, he proposed revising the current joint government-BOJ agreement, which focuses on overcoming deflation, so it more clearly delineates how the two institutions will cooperate in managing inflation.
"Japan needs an environment where the BOJ can make timely and appropriate decisions toward normalising monetary policy," Noda said. He warned that politicians should refrain from remarks that might threaten the central bank's independence.
On the ruling camp's stance
Takaichi has been associated with a platform favouring loose fiscal and monetary settings and has in the past asserted that the government holds authority over monetary policy objectives. More recently, however, she moderated her critical tone and acknowledged the BOJ's decision to raise rates in December after renewed yen weakness.
Japan has long used both verbal warnings and direct market operations to counter abrupt yen appreciation that can harm exporters. Since 2022, interventions have increasingly targeted sharp yen declines, as those moves raise import costs and contribute to broader inflationary pressures. Noda's comments align with that shift in emphasis but underscore his view that fiscal credibility and a protected central bank role are prerequisites for any intervention to have lasting effect.
Markets, politicians and central bankers now face a narrow window in which to convince investors that Japan's policy mix will not exacerbate fiscal strain or entrench inflation risks - a challenge that Noda framed as central to restoring stability in the yen and domestic bond markets.