Prime Minister Sanae Takaichi emphasized that her administration's economic strategy is focused on boosting Japan's growth potential through significant investments rather than manipulating exchange rates. This comes after a joint U.S.-Japan intervention and a recent rate hike by the Bank of Japan, which temporarily improved the yen's performance against the dollar.
As of Thursday, the dollar was trading at 158.37 yen, down from a peak of over 163 in late July, but still up approximately 7.65% year-over-year. Analysts from Societe Generale and OCBC Group Research noted that while market sentiment anticipates further intervention, the yen's undervaluation continues to exert depreciation pressures.
Takaichi's spending plans have faced criticism for contributing to the yen's weakness and rising bond yields, raising concerns among U.S. policymakers about potential sell-offs of Japanese Treasury holdings, which exceed $1.1 trillion. The Japanese government aims to align spending with a strategy to reduce the debt-to-GDP ratio while managing bond issuance effectively