Yen tumbles following report Japan PM plans snap poll

Japanese officials have stepped up warnings against what they describe as excessive and speculative FX moves

The yen dropped to its weakest level against the US dollar since July 2024, as losses accelerated following speculation that Prime Minister Sanae Takaichi may soon call a snap election.

The Japanese currency fell as much as 0.5 per cent to 158.91 per US dollar on Tuesday (Jan 13), surpassing the previous low of 158.87 in January 2025. Government bonds also slumped across the curve.

With the prime minister’s popularity running high, going to the polls would likely cement her authority and bring a second wind to the so-called Takaichi trade, which has helped fuel bond losses and a weak Japanese currency.

The yen was the worst performer among its Group-of-10 peers in 2025, gaining just 0.3 per cent against the US dollar. Some yen watchers see the currency weakening to 160 per greenback or beyond by the end of 2026, driven by still-wide US-Japan yield gaps, negative real rates and persistent capital outflows.

Japanese officials, including Finance Minister Satsuki Katayama, have stepped up warnings against what they describe as excessive and speculative FX moves. She and US Treasury Secretary Scott Bessent shared concerns about the weakening yen during a bilateral meeting in Washington.

The risk of an official intervention is also back in focus. The Ministry of Finance last intervened in the currency market on Jul 12, 2024, when the US dollar-yen hit a high for the day of 159.45. It intervened three other times that year when daily highs were 161.76, 160.17 and 157.99. Officials have indicated they are more concerned by volatility and the pace of moves than specific levels.

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In Japan, intervention decisions are made by the Ministry of Finance and executed by the Bank of Japan through a handful of commercial banks. The government typically sells US dollars to strengthen the yen in the spot market. BLOOMBERG

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