The USD/JPY pair has experienced a depreciation, influenced by concerns over potential intervention and robust wage data that bolster the Japanese Yen. Finance Minister Katayama issued a caution regarding potential intervention as the Yen approached 160 per Dollar, indicating readiness to take action if necessary. Japan’s foreign reserves decreased by USD 77.11 billion, reaching USD 1.31 trillion in May, marking a multi-month low. USD/JPY continues to decline for the second consecutive day, hovering near 159.90 during the Asian trading session on Friday. The currency pair depreciated as the Japanese Yen found support from heightened fears of government intervention.
Japan’s Finance Minister Satsuki Katayama reiterated caution to the market as the JPY approached the significant 160.00 per USD threshold, underscoring that authorities are fully equipped to implement necessary measures in the foreign exchange market when required. Speculation is increasing that Tokyo has already intervened in the market, supported by a significant reduction in financial buffers. Japan’s foreign reserves experienced a significant decline of USD 77.11 billion, concluding May at USD 1.31 trillion. This figure represents a decrease from USD 1.38 trillion in the preceding month and is the lowest level recorded since July of the previous year. Within these reserves, foreign currency holdings decreased to USD 1.09 trillion, comprising USD 931.68 billion in securities and USD 162.24 billion in deposits.
Meanwhile, Prime Minister Sanae Takaichi acknowledged that a weak Yen presents both benefits and drawbacks; however, Tokyo’s economic strategies aim to enhance domestic economic capacity rather than engage in currency manipulation. On the macroeconomic front, overall household spending in Japan decreased by 0.5% year-on-year in April 2026. While this marked the fifth consecutive month of contraction, it indicated a moderation from the 2.9% decline observed in the previous month and surpassed market expectations for a more significant 1.5% decrease.
Conversely, Labour Cash Earnings experienced a year-on-year growth of 3.5% in April, marking an acceleration from the upwardly revised 3.1% increase observed in the preceding month and exceeding market expectations of 3.2%. This marked the 52nd consecutive month of growth in nominal wages, significantly bolstering the argument for a Bank of Japan interest rate hike at its forthcoming June 15–16 meeting.