Yen Outperforms G-10 Peers After Japan’s Verbal Intervention

The yen advanced on Tuesday, outperforming its Group-of-10 peers, as markets welcomed supportive remarks from Japanese officials and cheered the outcome of a high-profile between US and Japanese leaders in Tokyo.

The currency gained as much as 0.4% against the dollar after Japan’s minister for growth strategy Minoru Kiuchi said authorities will keep monitoring the impact of yen weakness on the economy. Meanwhile, President Donald Trump hailed the US’s alliance with Japan and praised new Prime Minister Sanae Takaichi’s plans to increase defense spending.

The constructive tone offered some respite for investors who that Trump will increase pressure on Japan to ramp up its military spending. Still, concerns remain over how Japan will finance the $550 billion US investment fund that it has agreed to under the trade deal with Trump. The yen is still down almost 3% against the greenback this month, making it the worst-performing G-10 currency.

US Treasury Secretary Scott Bessent, who is traveling with Trump to Japan, refrained from commenting on the Bank of Japan’s policy despite previously stating that the central bank was “behind the curve.” He instead voiced support for Takaichi’s expansionary fiscal agenda.

Investor focus now turns to the Bank of Japan’s policy meeting later this week, particularly Governor Kazuo Ueda’s post-decision press conference. While no change is expected at this meeting, markets are watching for signals on the timing of the next rate hike, with pressure building due to elevated inflation and sustained yen weakness.