Tokyo Cannot Talk its Way Out of the Yen's Slide

No matter how strongly Japanese leaders seek to check the yen's slide, their efforts will remain only a temporary fix, The Mainichi argued in recent editorial.

Japanese Prime Minister Sanae Takaichi has called the yen's undervaluation a problem as the currency remains near ¥160 to the dollar.

The newspaper said Japan should instead review its fiscal policy, which it identified as a root cause of the currency's weakness.

Prime Minister Sanae Takaichi has disclosed that when she met U.S. President Donald Trump in September, he told her that U.S. trade was facing difficulties because of the yen's depreciation.

Takaichi said she responded that, as a general matter, an undervalued yen is a problem.

Her account is consistent with separate reports of the meeting.

The yen had fallen to nearly ¥160 to the dollar at one stage. With the currency's weakness threatening to increase inflationary pressure in Japan, the government has become increasingly concerned about the exchange rate.

Verbal intervention, in which senior officials make statements intended to influence currency markets, is normally handled by the finance minister and other officials, making Takaichi's remarks notable.

The yen subsequently strengthened toward the ¥156 range, but The Mainichi editorial characterized the move as only a temporary response.

The newspaper also pointed to the coordinated yen-buying intervention conducted by Japan and the United States in July, saying its effects were short-lived.

Trump's comments on exchange rates have added another dimension to the issue. The editorial argued that Washington could use concerns about the yen as leverage in trade negotiations.

That is the newspaper's assessment rather than an established fact.

The Mainichi also criticized Takaichi's "proactive fiscal spending" policy, pointing to budget requests exceeding ¥143 trillion and the proposed consumption-tax reduction.

The editorial argued that the resulting uncertainty over government finances could undermine confidence in Japanese assets and contribute to pressure on the yen.

The newspaper concluded that Japan needs to establish a credible path toward fiscal sustainability if it wants to stabilize financial markets and address the yen's longer-term weakness.