Japanese Finance Minister Katsunobu Kato said on Friday that the government was concerned about excessive volatility in the foreign exchange market as the yen came under pressure due to fiscal concerns.
"We have been recently seeing one-sided, rapid moves on the foreign exchange market," he said, signaling concerns over the yen's sharp downturn since the election of fiscal dove Sanae Takaichi as the ruling party's new leader on Saturday.
The Japanese yen is on pace for a near 4% drop over the week, its biggest decline since early October last year, as investors fret about Takaichi's more fiscally expansive policy stance and fast-receding chances of a near-term rate hike.
"As I have stated before, what's important is that exchange rates move in a stable manner, reflecting economic fundamentals," Kato said at a regular news conference. "The government will thoroughly monitor for excessive fluctuations and disorderly movements in the forex market."
Speaking generally about the impact of exchange rate moves in the Japanese economy, there are both positive and negative effects that manifest through various channels, Kato said. "The extent and nature of these effects vary depending on the domestic and global economic environment at the time," he added.
On Thursday, Takaichi said in a television interview that she wouldn't want to trigger excessive yen declines. "But in general, there are pros and cons to a weak yen," Takaichi said.
While a weak yen serves as a buffer for manufacturers hit by higher U.S. tariffs, it hurts households by pushing up the cost of raw material imports, she said.
