Finance Minister Satsuki Katayama has declared that all policy instruments remain on the table to stabilize the yen, as the currency approaches a 34-year low against the U.S. dollar. The warning comes amid growing market pressure and sustained capital outflows.
- Yen weakened to 157.80 per U.S. dollar in January 2026, its lowest since 1990
- Net outflow of $18.2 billion in Japanese government bonds in December 2025
- Bank of Japan maintains key interest rate at -0.1%
- Japan’s foreign exchange reserves: $1.32 trillion as of December 2025
- Consumer price index up 3.4% year-on-year in December 2025, with imported inflation contributing 1.2 percentage points
- Finance Minister Satsuki Katayama confirmed all policy tools remain available
Finance Minister Satsuki Katayama has affirmed that the Japanese government is prepared to use any available measure to support the yen, following a sharp decline in the currency’s value. The yen dipped to 157.80 per U.S. dollar in early January 2026, marking its weakest level since 1990. This depreciation has intensified concerns about imported inflation and financial stability, particularly as Japan’s current account balance remains under pressure from rising energy import costs. The government’s stance reflects a shift in tone from previous months, when officials had downplayed intervention risks. With the Bank of Japan maintaining ultra-loose monetary policy—keeping its key interest rate at -0.1%—the yen has been under persistent downward pressure. Meanwhile, foreign investors have continued to reduce holdings of Japanese government bonds, contributing to a net outflow of $18.2 billion in December 2025 alone. Katayama’s remarks underscore that the Ministry of Finance retains authority over foreign exchange intervention, including the use of sovereign wealth funds and coordinated actions with the central bank. The Ministry’s foreign exchange reserves stood at $1.32 trillion as of December 2025, providing a substantial buffer should intervention become necessary. Market participants are now closely watching for signals of direct intervention, particularly if the yen breaches 160 against the dollar. The currency’s weakness has broader implications for Japan’s trade competitiveness and inflation outlook. Exporters benefit from a weaker yen, but import-dependent sectors—especially energy and food—face rising costs. The consumer price index rose 3.4% year-on-year in December 2025, with imported inflation contributing nearly 1.2 percentage points to the increase.