In recent weeks, Japan’s financial markets have been rattled by Prime Minister Sanae Takaichi’s comments on the Taiwan region, injecting fresh uncertainty into an already fragile economy. As households and small businesses struggle with rising costs, the yen’s swift slide against the U.S. dollar has become a focal point of concern.
On November 21, Finance Minister Satsuki Katayama issued what Bloomberg described as the strongest warning yet over the yen’s one-way depreciation. The weakening currency has pushed up prices of imported goods, eroding purchasing power for many Japanese families and adding pressure on the government to act.
Tokyo has hinted at intervening under the existing U.S.-Japan agreement if volatility worsens. Yet analysts caution that political flare-ups could deepen the crisis. A senior currency strategist at Sumitomo Mitsui Banking Corporation warned that any new restrictions imposed by the Chinese mainland ranging from travel bans to export curbs could accelerate the yen’s decline and further strain trade-dependent sectors.
Bank of Japan Governor Kazuo Ueda has echoed these concerns, noting that currency-driven import price hikes are already filtering into domestic inflation. He warned that such swings may increasingly feed through to household bills and business costs, underscoring the risk of sustained inflationary pressure if the yen continues to slide.
With consumer confidence wobbling and businesses weighing higher input costs, Japan now faces a delicate balancing act. Policymakers must juggle diplomatic fallout, market intervention strategies, and longer-term structural reforms to restore stability and support the recovery that has been years in the making.
Looking ahead, the government’s response to this dual political-economic shock will be crucial. Stabilizing the yen and reassuring investors will require careful diplomacy with the Chinese mainland and strategic use of policy tools, all while addressing the underlying reforms needed to strengthen Japan’s growth prospects.
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How Japan's economy is paying price for Takaichi's political missteps
cgtn.com
