The Japanese Yen slipped on Tuesday following a report that Prime Minister Sanae Takaichi expressed concerns about additional interest rate increases to central bank governor Kazuo Ueda last week, while markets continued to navigate an uncertain global trade backdrop.
The currency declined 0.83% to 155.93 per Dollar, marking its weakest level in almost two weeks.
The report, published by The Mainichi Daily, also contributed to a drop in Japanese government bond yields.
The development adds further uncertainty to an already complex policy environment for the Bank of Japan, which has been grappling with a softer Yen that has driven up the cost of imported fuel and food for households.
Prior to the report, most economists surveyed by Reuters news agency expected the central bank to lift interest rates to 1% by the end of June, while financial markets were pricing in about a 70% probability of a rate increase by April.
“It puts to the test the view that a corner has been turned in the Yen,” stated Kenneth Broux, head of corporate research, FX and rates at Societe Generale.
“If the government is lobbying the central bank, doubts again re-emerge over the independence of the central bank.”
Takaichi told parliament that a weaker currency has both advantages and disadvantages.
Additional pressure came from China’s export restrictions targeting Japanese firms. The Yen also declined more broadly, dropping 0.8% to 183.75 per Euro.
The currency has attracted attention from US officials. According to the Nikkei, the New York Federal Reserve, acting on behalf of the US Treasury Department, led so-called rate checks last month aimed at supporting Japan’s currency, reportedly without a request from Tokyo.
“It tells you that Japan is not overly concerned (about the Yen), even though they have been intervening verbally to manage the pace of the slide in the Yen,” Broux said.
Moreover, investors are also weighing a shifting and uncertain trade landscape.
On Friday, the Supreme Court of the United States ruled that President Trump had exceeded his authority by using a 1977 emergency statute to impose tariffs. However, within hours, he cited a separate legal provision and introduced a new blanket tariff on all imports.
A 10% tariff took effect one minute after midnight on Tuesday, according to a customs notice. It remains uncertain when the proposed increase to 15% would be implemented.
To date, Trump has formally issued an executive order only for the 10% levy. He has also cautioned countries against stepping back from recently concluded trade agreements following the court’s decision to invalidate his emergency tariffs.