Japan signals FX vigilance, leans against yen weakness with verbal intervention

Japan's government spokesman has heightened vigilance on FX moves, particularly focusing on yen weakness. Chief Cabinet Secretary Minoru Kihara has indicated monitoring of long-term interest rates, interpreted as a warning to currency markets. Recent yen depreciation poses risks of destabilization, leading to increased scrutiny as expectations of gradual Bank of Japan policy normalization grow. Officials aim to prevent excessive yen moves that could undermine confidence, with verbal intervention being the preferred initial response. While the government does not target specific exchange rates, their messaging reinforces readiness to respond to excessive market behavior. This coordinated approach reflects Japan's intent to stabilize the yen without triggering the volatility associated with direct intervention, signaling a cautious path forward for monetary policy in the context of tightening financial conditions.