#Japan Market##Yen Depreciation# FX168 Financial News Agency (Asia Pacific) reported on Tuesday (January 7) that after the yen's Exchange Rates fell to the lowest level since July of last year, Japan issued a warning to speculators for the first time in 2025, expressing concern about the sudden and unilateral trends in the Forex market.

Japan's Finance Minister Katsunobu Kato said to reporters on Tuesday that it is very important for the currency to reflect fundamentals in a stable manner, as recent sharp one-way fluctuations in Exchange Rates have been observed.

Katsunobu Kato stated, 'If there are excessive fluctuations in the Forex market, we will take appropriate action.' Bloomberg reported that this is an implicit threat of direct intervention by the authorities.

Katsunobu Kato expressed 'deep concern' regarding recent fluctuations, including those driven by speculators.

On Tuesday morning in Asia, the yen's Exchange Rates against the US dollar briefly touched 158.42 yen per dollar, the lowest point in nearly six months.

After Katsunobu Kato's speech, the yen strengthened somewhat. At Tokyo's lunchtime, the yen's Exchange Rates were trading around 158.11 yen per dollar.

The yen continues to hover around levels that triggered intervention last summer, as market expectations for the timing of Japan's interest rate hike and the USA's rate cut were both postponed in December last year. The differences in interest rates and Bonds yields between Japan and the USA are one of the key factors affecting the Exchange Rates.

Japan entered the Forex market four times in 2024, spending nearly 100 billion USD to support the yen.

The recent interventions by the Japanese authorities occurred in July of last year, when the Exchange Rates fell below 160 yen per dollar.

(Screenshot source: Bloomberg)

Bloomberg pointed out that any further changes in the expectations for interest rates in the USA or Japan could significantly increase market speculation about renewed interventions. The announcement last Friday from the USA.Non-farm Employment Datacould be one of the potential catalysts for sudden fluctuations in the Exchange Rates.

The Governor of the Bank of Japan, Kazuo Ueda, unexpectedly issued a cautious message on interest rates during the policy meeting in December of last year, and since then, expectations for a recent interest rate hike by the Bank of Japan have weakened.

Overnight swap trading on Tuesday showed a 48% chance of an interest rate hike by the Bank of Japan in January. In contrast, expectations for action by the Bank of Japan before January 2025 reached over 80% last December.

In a series of New Year speeches on Monday, Ueda Kazuo suggested that if the Japanese economy continues to improve this year, the Bank of Japan will still raise the benchmark interest rate. This statement opens the door for interest rate hikes at future meetings.