Japan's Vice Finance Minister Warns of Currency Intervention as Yen Plunges to 159 Level
Emergency Statement from Vice Finance Minister Mimura
On January 14, 2026, as the Japanese yen rapidly depreciated in foreign exchange markets, Vice Finance Minister Jun Mimura delivered a strong message to reporters.
Mimura stated that he was "extremely concerned" about the currency movements since late last week, noting that "rapid movements have been observed." More significantly, he emphasized that "in response to excessive movements, we will not rule out any measures—I repeat, we will not rule out any measures—and will take appropriate action."
The deliberate repetition of this phrase was clearly intended to send an unambiguous signal to the markets that all options, including direct currency intervention, are on the table.
Mimura also pointed out that the current yen weakness lacks fundamental economic backing: "When I ask whether there are economic fundamentals to support these movements, I cannot see that there are." This suggests the government views the current depreciation as driven primarily by speculative trading rather than economic reality.
Background to the Yen's Rapid Decline: The Shock of Dissolution Reports
The immediate trigger for the yen's sharp decline was a report on January 9 that Prime Minister Sanae Takaichi was considering dissolving the House of Representatives.
When the Yomiuri Shimbun reported that Takaichi was "considering dissolving the lower house at the opening of the ordinary Diet session scheduled for January 23," the foreign exchange market immediately accelerated yen selling. Within approximately one hour of the report, the yen fell more than 80 pips, briefly touching the mid-159 yen level per dollar—a level not seen in about 18 months.
Behind this market reaction lies concern about the Takaichi administration's "responsible active fiscal policy" approach. Since taking office, Prime Minister Takaichi has led the formation of a supplementary budget exceeding 18 trillion yen and the largest-ever 122 trillion yen initial budget for fiscal year 2026. Market participants worry that a ruling coalition victory in the general election would accelerate this aggressive fiscal stance, potentially worsening Japan's fiscal situation.
Finance Minister Satsuki Katayama echoed these warnings on January 14, stating after meeting with Prime Minister Takaichi that "in response to excessive movements, including speculative ones, we will not rule out any measures and will take appropriate action."
What Is Currency Intervention?
Currency intervention (officially called "Foreign Exchange Smoothing Operations") is a policy tool whereby the government and Bank of Japan buy or sell currencies in the market to curb sharp fluctuations in exchange rates and stabilize them.
When the yen is depreciating rapidly, the government conducts "dollar-selling, yen-buying intervention" by selling its dollar reserves to purchase yen, attempting to halt the yen's decline. Conversely, when the yen is appreciating, "yen-selling, dollar-buying intervention" is implemented.
The authority to decide on intervention rests with the Minister of Finance, while the Bank of Japan acts as the agent for the Ministry and conducts the actual market operations. Funds for intervention are drawn from the Foreign Exchange Fund Special Account.
Japan's Currency Intervention History
2022 Intervention: First Yen-Buying Intervention in 24 Years
In September 2022, as the yen rapidly depreciated to the 145-yen level per dollar, the government and Bank of Japan conducted their first "dollar-selling, yen-buying intervention" in 24 years. This intervention was carried out intermittently from September to October, totaling approximately 9.1 trillion yen.
At the time, the U.S. Federal Reserve was implementing significant rate hikes to combat inflation, and the widening Japan-U.S. interest rate differential was the primary driver of yen weakness.
2024 Large-Scale Intervention: Record-Breaking Scale
In 2024, even larger-scale currency interventions were implemented. As the yen fell to the 160-yen level—a 34-year low—the government and Bank of Japan conducted multiple interventions from April to July.
- April–May: Approximately 9.7 trillion yen (largest single intervention period on record)
- July: Approximately 5.5 trillion yen
Total intervention in 2024 exceeded 15 trillion yen, making it the largest intervention on record. The July intervention, in particular, was considered a "stealth intervention" timed immediately after the U.S. CPI announcement, and was praised for its skillful execution in supporting a market trend reversal.
Effectiveness and Limitations of Intervention
Expert opinions are divided on the effectiveness of currency intervention. Indeed, after the July 2024 intervention, the dollar-yen rate plunged approximately 20 yen in about a month, from the 161-yen level to the 141-yen level. However, this was attributed not only to intervention but also to fundamental changes such as rising expectations of Fed rate cuts and additional Bank of Japan rate hikes.
Most experts point out that while currency intervention can "buy time," it lacks the power to fundamentally reverse currency trends. The long-term direction of exchange rates is ultimately determined by each country's monetary policy and economic fundamentals.
Unique Characteristics of the Current Yen Weakness
The current yen weakness has characteristics that differ from previous episodes. As Vice Minister Mimura noted, recent yen depreciation has diverged from Japan-U.S. interest rate differentials.
Since 2025, Japan's 10-year yield has risen by approximately 0.5%, while the U.S. 10-year yield has fallen by about 0.5%. Normally, such narrowing of the interest rate differential should be a yen-positive factor, yet the yen has continued to weaken.
Behind this "yen weakness that defies interest rate differentials" are several factors:
- Japan's structural trade and services balance deficit: Continuous structural yen-selling pressure
- Concerns about the Takaichi administration's active fiscal policy: Pricing in of fiscal deterioration risks
- Accumulation of speculative positions: Yen selling by hedge funds and other speculators
Outlook for the Future
The 2026 currency market faces multiple uncertainties.
If Prime Minister Takaichi proceeds with dissolving the House of Representatives, the election outcome could further strengthen the aggressive fiscal policy approach. On the other hand, if rapid yen depreciation negatively impacts citizens' daily lives, it could also affect the administration's approval ratings.
The possibility of additional Bank of Japan rate hikes is also drawing attention. Some voices suggest that if import price increases due to yen weakness heighten inflationary pressure, the BOJ might move up a rate hike to April.
Vice Minister Mimura's statement that "we will not rule out any measures" serves both as a strong deterrent to the market and as groundwork for potential intervention. With the psychologically significant 160-yen level in sight, close attention to government and BOJ movements remains crucial.
Your Country's Approach to Currency Policy
In Japan, opinions on currency intervention vary widely. While ordinary consumers suffering from inflation due to yen weakness strongly favor intervention, there are also calm assessments that intervention has only temporary effects, as well as voices cautioning against excessive yen strength out of consideration for export industries.
How does your country's government respond to currency depreciation? Is currency intervention accepted as a standard policy tool? We'd love to hear about the situation in your country—please share your thoughts!
References
- https://news.yahoo.co.jp/articles/aede0afc8673abfd9eea81841659d36df857b5e4
- https://www.nikkei.com/topics/24050200
- https://www.bloomberg.com/jp/news/articles/2026-01-14/T8UESZKJH6V700
- https://www.dlri.co.jp/report/macro/534350.html
- https://www.nli-research.co.jp/report/detail/id=80123
- https://www.tokyostarbank.co.jp/feature/education/trends/20240813_3.html
Reactions in Japan
Repeating 'we will not rule out any measures' twice is a serious signal. Intervention is certain if we break 160. It was the same pattern in 2024.
I can't take it anymore. Imported foods keep getting more expensive. Please intervene and strengthen the yen! Rising prices are really straining our household budget.
Currency intervention is merely buying time. Fundamentally, we either need to accelerate BOJ rate hikes or wait for U.S. rate cuts. There's also the issue of fiscal discipline.
Honestly, our company is doing well because of the weak yen... A sudden yen spike from intervention would be problematic. I hope it stabilizes around 150.
Remember the July 2024 intervention? It dropped from 161 to 141. If intervention comes this time too, it'll move quickly, so be careful with position management.
If PM Takaichi's active fiscal policy is causing the yen weakness, isn't it putting the cart before the horse to address it with intervention? We should focus on fiscal consolidation first.
Pensions don't increase but prices keep rising. If the weak yen continues, we really won't be able to survive. The government needs to do something.
This yen weakness can't be explained by interest rate differentials. Speculative yen selling is the main cause. Verbal intervention alone has limits, and actual intervention will likely be needed.
The weak yen is a tailwind for inbound tourists, but procurement costs are also rising, so I have mixed feelings. Honestly, I want it to stabilize at a moderate level.
I'm studying abroad in America next year but the yen won't stop falling... Study abroad costs keep ballooning. If they're going to intervene, please do it soon.
The yen falling on dissolution news is like the market giving a vote of no confidence in the Takaichi administration's fiscal management. Temporary relief through intervention won't solve the fundamental problem.
Food costs are really tough. Rice, bread, everything is getting more expensive. If they don't stop the weak yen, it's really hard for families raising children.
We use overseas cloud services so the weak yen hits us directly. AWS and Azure are effectively more expensive. The costs are no joke.
Stock prices of exporters like Toyota are rising, but citizens' lives are exhausted. The government should seriously discuss how to address this imbalance.
The yen won't stop falling because America isn't cutting rates. Japan's efforts alone have limits. Can't Japan and the U.S. coordinate?
I've seen Japan's currency interventions many times before. They work short-term, but until the fundamental interest rate differential issue is resolved, the yen weakness trend won't change. It's just buying time until the Fed cuts rates.
In France, the ECB has intervened in currency markets before too. The effect was limited. It's the same for Japan—intervention alone won't fundamentally solve the problem. What's really needed is a change in BOJ policy.
From Hong Kong's perspective, Japan's weak yen is boosting export competitiveness. Japanese companies are gaining advantages in competition with Chinese products. If intervention strengthens the yen, that hard-won competitiveness might be lost.
159 yen is certainly a historic level, but given Japan's fiscal situation, it's not surprising. It's clear that PM Takaichi's active fiscal policy is unsettling markets. Rather than intervention, a message of fiscal consolidation might be needed.
In Germany, we've ceded currency sovereignty to the ECB, so we can't conduct independent currency intervention. In a way, I envy Japan's ability to intervene independently. However, I have doubts about the lasting effectiveness of intervention.
The Indian rupee has also been weak against the dollar. Like Japan, our central bank sometimes intervenes. However, for emerging markets, foreign reserves are limited, so we can't conduct interventions as large as Japan's.
The Australian dollar is also volatile like the yen. The RBA is generally reluctant to intervene in forex markets, but Japan's proactive approach is interesting. Whether it's effective is another matter.
From our experience with the Mexican peso, currency intervention has a big psychological effect on markets. More than the actual intervention amount, showing the stance of 'we can intervene anytime' is important. Vice Minister Mimura's statement is a perfect example.
The Korean won has also been weak against the dollar. Since Japan and Korea compete in exports, a weaker yen disadvantages Korean companies. However, I think currency intervention is a double-edged sword.
The Polish zloty is also a volatile currency, but as an EU member, we're influenced by ECB policy. I think Japan's ability to conduct independent monetary policy is a strength. But that also comes with greater responsibility.
Singapore is unique in that our central bank uses the exchange rate as a policy tool. The purpose differs from Japan's intervention, but the importance of currency management is the same. I think 159 yen is definitely a level to be wary of.
The Brazilian real has also been subject to intervention many times. The circumstances differ between emerging and developed market currencies, but I think verbal intervention's effect on markets is the same. 'All measures' is a strong message.
The Swiss National Bank has also conducted large-scale currency interventions in the past. The EUR/CHF floor is famous. Japan's interventions are large in scale, but I think it's difficult to achieve lasting effects.
The Canadian dollar tends to move with oil prices, but differently from the yen. If yen weakness continues, Japanese tourists to Canada might decrease. Exchange rates really do affect each other globally.
From New Zealand's perspective, yen weakness is welcome as it makes trips to Japan cheaper. But it must be tough for Japanese consumers. If intervention suddenly strengthens the yen, the tourism industry will be affected too.