Takaichi Says Japan’s Growth Spending Will Support Yen Confidence

Japanese Prime Minister Sanae Takaichi said Oct. 1 that investment to expand Japan’s economic capacity would support confidence in the yen, as its weak valuation continues to trouble policymakers.

Takaichi said she had raised the yen’s undervaluation with U.S. President Donald Trump during a conversation last month. She said her economic policy aims to increase growth potential, not manage exchange rates.

The yen gained 3.3% against the dollar in the third quarter, with support from a joint U.S.-Japan intervention and a 25-basis-point Bank of Japan rate increase in September.

The dollar traded at 158.37 yen as of 5:57 a.m. ET on Oct. 1. That was below a peak above 163 yen in late July, but the dollar remained around 7.65% higher against the yen than a year earlier.

Takaichi said investment in crisis management and growth sectors would increase Japan’s economic capacity and global competitiveness, helping support market confidence in the yen. She also said the government would set spending at levels consistent with lowering the country’s debt-to-GDP ratio and manage bond issuance appropriately.

A weak yen raises the cost of imports and contributes to inflation in Japan. Critics have blamed Takaichi’s spending plans for pressure on the currency and higher bond yields. Japan holds more than $1.1 trillion in U.S. Treasury debt, the largest share among foreign buyers.