Japan’s Katayama said authorities are closely watching FX and in dialogue with the US, warning oil-driven volatility is impacting the yen and economy, keeping intervention risk in focus. She also confirmed holding talks with US Treasury Secretary Scott Bessent, with both sides agreeing to maintain close communication on currency issues.
Her comments come as sharp swings in oil markets—driven by the ongoing Middle East conflict—spill over into foreign exchange markets, contributing to heightened volatility in the yen. Katayama emphasised that fluctuations in energy prices are not only affecting financial markets but are also feeding through to the real economy, impacting households and business conditions.
The linkage between oil and currency moves has become increasingly important for Japan, a major energy importer, where higher oil prices can weigh on the trade balance and put downward pressure on the yen. Katayama’s remarks suggest authorities are acutely aware of these dynamics and remain prepared to respond if market moves become disorderly.
At the same time, she sought to draw a clear line between fiscal and monetary policy responsibilities. When asked whether Bank of Japan policy had been discussed during her meeting with Bessent, Katayama said she was not aware of any such conversation, reinforcing the formal separation between government currency policy and central bank decision-making.
The overall tone of her comments underscores a familiar message from Japanese authorities: that excessive or disorderly currency movements are undesirable and warrant close attention. While no explicit intervention warning was issued, the combination of G7 communication, bilateral engagement with the US and references to economic impact keeps the risk of policy action in focus.
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Keeps intervention risk alive, particularly if yen weakness accelerates
