Yen Falls to 157 Level Despite BOJ Rate Increase
On December 19, 2025, the Bank of Japan raised its policy rate to 0.75%, marking a 30-year high in an effort to curb inflation and halt yen depreciation. However, the market's reaction was unexpected and counterproductive to these intentions.
Following Governor Ueda Kazuo's press conference, the yen rapidly depreciated to the 157 level against the dollar, its weakest position in approximately four weeks. The governor's cautious stance on future rate hikes, describing the approach as "groping in the dark," led markets to interpret that the BOJ's room for additional tightening was limited.
Finance Minister Katayama Vows "Resolute Action"
In response to this sharp yen decline, Finance Minister Katayama Satsuki has expressed strong concern. After the G7 finance ministers and central bank governors meeting on the evening of December 19, she stated that "there has been a one-sided and rapid movement in the past half-day and few hours, which we view with concern," emphasizing that "we will take appropriate action against excessive movements."
Furthermore, on December 22, in an exclusive interview with Bloomberg, Finance Minister Katayama made it clear that she is "prepared to take resolute action" against excessive and disorderly currency fluctuations. She made her willingness to intervene in the market explicit, characterizing post-BOJ press conference currency movements as "speculative rather than based on fundamentals," and explained that measures could be taken based on the September Japan-U.S. joint statement by finance ministers.
From Verbal to Actual Intervention? Market Vigilance Intensifies
Finance Minister Katayama's series of statements follows a pattern of escalating "verbal intervention." On November 12, she characterized the yen's weakness as "one-sided and rapid movement," stating for the first time that "negative aspects are becoming more prominent." On November 21, she remarked that forex intervention was "naturally considered" as an option, raising the tone of caution.
With December's "resolute action" statement, market speculation has intensified that actual intervention may be imminent. Looking at past intervention records, in 2024, yen-buying interventions totaling approximately 15 trillion yen were implemented at the 160 yen level. The current 157 yen level is approaching that intervention threshold.
"Takaichi Trade" and Structural Factors Behind Yen Weakness
The persistent yen weakness has roots in the economic policies of Prime Minister Takaichi Sanae's administration. The Takaichi government, which took office in October, advocates aggressive fiscal expansion and continued monetary easing, creating what markets call the "Takaichi Trade" - sustained yen-selling pressure.
The comprehensive economic package approved by the cabinet in November totaled 21.3 trillion yen, with a supplementary budget of 17.7 trillion yen - both substantial figures. Experts point out that this fiscal expansion stance is acting as a factor depreciating the yen's value.
Particularly noteworthy is that yen weakness continues despite a narrowing Japan-U.S. interest rate differential. Since the beginning of 2025, Japan's 10-year yield has risen by approximately 0.5%, while the U.S. 10-year yield has fallen by 0.5%. Yet the yen's depreciation trend persists, with market observers viewing this as "speculative movement that cannot be explained by fundamentals."
Japan-U.S. Joint Statement as Basis for Intervention
Finance Minister Katayama repeatedly references the Japan-U.S. joint statement issued by finance ministers in September 2025. This statement explicitly states that currency intervention is "equally appropriate in response to excessive volatility or disorderly depreciation or appreciation."
U.S. Treasury Secretary Bessent has also communicated via social media that the Japanese government's stance of giving the BOJ policy latitude is "key to stabilizing inflation expectations and avoiding excessive exchange rate fluctuations," indicating shared recognition between Japanese and U.S. monetary authorities regarding yen weakness concerns.
Market Response and Future Outlook
Following Finance Minister Katayama's statements, the yen temporarily strengthened from the 157.40 level to the 157.20 level. However, it subsequently returned to trading around the 157 level, suggesting that vigilance has not completely restrained market movements.
Among analysts, views include "155 yen is the first line of defense" and "actual intervention is likely as the rate approaches 160 yen." However, some cautious opinions suggest that "we haven't reached the eve of intervention, and yen strengthening will remain a temporary reaction."
Future focus will be on year-end and New Year currency fluctuations. During this period, market participation typically decreases, making speculative movements more likely to accelerate. Multiple factors will influence the yen's trajectory, including the scale of the fiscal 2026 budget and the timing of the BOJ's next rate hike.
Economic Impact and Public Life
Yen weakness presents a dual nature for the Japanese economy. Japan becomes an affordable destination for foreign tourists, and major export companies see profit increases. However, energy and raw material import costs rise, intensifying inflationary pressure on households.
Finance Minister Katayama's statement that "negative aspects are becoming more prominent" reflects awareness of these rising costs' adverse effects on citizens' lives. Concerns also exist about deteriorating profitability for domestic-oriented companies, placing the government in a position where yen weakness cannot be ignored.
While currency intervention is being actively discussed in Japan, what are the prevailing views on exchange rate policy and currency value in your country? What are your thoughts on government intervention in markets? We'd love to hear perspectives from your country's viewpoint.
Reactions in Japan
The fact that the yen is weakening even after the BOJ raised rates is clear proof the market has lost faith. I think verbal intervention from Finance Minister Katayama alone has reached its limit.
Imported goods keep getting more expensive because of the weak yen. My wallet hurts every time I shop at the supermarket. I want the government to do something about it soon.
If they're going to intervene, it'll probably be just before 160 yen. Intervening at 155 would trigger too much market backlash. I think the Ministry of Finance is carefully assessing the situation.
Since my company is mainly export-focused, the weak yen is honestly appreciated. But raw material costs are also rising, so we're not really benefiting that much in the end.
The combination of the Takaichi government's aggressive fiscal policy and BOJ's monetary easing is creating yen depreciation pressure. Without policy coherence, any intervention will only have temporary effects.
International travel has become really expensive. I'm debating whether to cancel my year-end overseas trip. The weak yen is too harsh.
When the Finance Minister says 'resolute action,' intervention is imminent. But considering year-end volatility, maybe I should clean up my positions now.
Pensions don't increase but prices keep rising. Life is getting harder because of the weak yen. I want the government to think more about citizens' livelihoods.
The yen weakening despite narrowing Japan-U.S. interest rate differential is completely speculative, ignoring fundamentals. I think the Ministry of Finance's assessment is correct.
From a tourism industry perspective, the weak yen bringing more foreign tourists is appreciated. But employee living costs are also rising, so wage increase pressure makes management tough.
If rate hikes can't stop the yen's decline, forex intervention is the only option left. Import costs for raw materials have risen too much - it's really tough for small and medium enterprises.
Past interventions were at the 160 level, so intervening at 157 feels premature. I think they'll wait a bit longer.
Salaries don't rise but prices keep climbing. It's ordinary people who are directly hit by the weak yen. They should have taken action sooner.
Export company stock prices are rising due to the weak yen, but this intervention vigilance is destabilizing the entire market. It's a dilemma for investors.
The Takaichi government's fiscal expansion and BOJ's monetary easing are creating contradictions. Without policy consistency, no amount of intervention will fundamentally solve the problem.
The market feels like it's testing the Finance Minister's words. Whether there's real resolve to intervene - the yen might weaken further over the year-end period.
Even if they intervene, it'll just return to yen weakness. Fundamentally it's a structural problem in the Japanese economy, so temporary intervention is meaningless.
Ingredient procurement costs have risen, and raising menu prices is reaching its limit. If the weak yen continues further, the business really won't be sustainable.
In the U.S., we basically let the market decide, but I understand Japan's intervention stance. Rapid fluctuations destabilize the economy.
The UK also experienced currency volatility after Brexit, so I understand Japan's position well. Forex intervention is sometimes a necessary measure.
In Germany, we're in the eurozone so we can't intervene unilaterally, but when a major economy like Japan intervenes, the impact is significant. I hope they do it carefully.
In France, there's mixed opinion on government market intervention, but in Japan's case, given the high import dependency, it seems unavoidable to some extent.
Mexico has also struggled with currency fluctuations, so I understand the Japanese government's actions. But intervention alone won't fundamentally solve the problem.
In China, the government manages exchange rates, but I think it's a difficult decision for a market economy like Japan to intervene. Timing is crucial.
South Korea is also affected by the weak yen, so we welcome Japan's intervention. But I hope it's done without undermining market freedom.
In Australia, as a resource-exporting country, we tend to welcome currency weakness, but for an importing nation like Japan, it's a serious issue.
In Poland, currency stability is considered important for economic growth, so I think Japan's intervention stance is correct.
Italy also struggled with currency fluctuations before adopting the euro, so I understand Japan's feelings. But they need to consider the cost of intervention too.
In Canada, our currency is linked to resource prices, so the situation differs from Japan, but I think responding to rapid fluctuations is necessary.
Brazil also has severe currency fluctuations, so government intervention is sometimes necessary. But in Japan's case, given its economic size, they should consider the impact on the global economy.
In India, exchange rate stability is considered important for attracting foreign investment. I think Japan's intervention makes sense.
In the UAE, our currency is pegged to the dollar, so I understand the difficulties of a floating exchange rate system like Japan's. Intervention at the right timing is important.
In Sweden, we value market freedom, but for rapid fluctuations like Japan's experiencing, I understand intervention as an option.
In Spain, we use the euro so we can't intervene unilaterally, but I think it's natural for Japan to take action to protect citizens' livelihoods.
Egypt has also experienced currency crises, so I think Japan's cautious stance is wise. Early response is important.
In Vietnam, exports are important so currency weakness is welcomed, but I understand the situation is different for a mature economy like Japan.