Japan’s Katayama: Debt ratio to fall slightly as government and BoJ work toward stable inflation
Japan's Finance Minister Satsuki Katayama said on Friday that the government expects the country’s debt-to-GDP ratio to fall slightly from last year’s level, even after compiling an extra budget to finance its latest stimulus package.
Key quotes
Expect Japan's debt to GDP ratio to fall slightly from previous year level even after compiling extra budget to fund stimulus package.
Japan is still halfway in achieving sustainable and stable price rises accompanied by wage gains.
Understand that Bank of Japan agrees with government view Japan is halfway in achieving sustainable, stable price rises accompanied by wage gains.
Important for government and Bank of Japan to continue working closely together to end deflation, achieve stable prices and economic growth.
We will guide appropriate debt management policy to ensure Japan does not lose market trust in its finances.
JGB yields move due to wide variety of factors including domestic economic, price and monetary policy developments as well as fiscal situation and overseas market moves.
We will guide appropriate debt management policy to ensure Japan does not lose market trust in its finances.
Market reaction
As of writing, the USD/JPY pair is down 0.08% on the day at 157.45.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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