Japan Adviser Urges Active Intervention, Fiscal Stimulus to Support Yen
A senior government adviser told NHK and Reuters that Tokyo can and should use its foreign exchange reserves to buy yen, arguing intervention and fiscal support are warranted to shield households from rising import costs. The comments come as the yen has fallen roughly six percent since the new administration took office, and they sharpen debate over trade offs between currency stability and Japan's high public debt.
A private sector member of a government advisory panel and adviser to Prime Minister Sanae Takaichi told national broadcaster NHK and Reuters on Monday that Japan can and should actively intervene in foreign exchange markets to prop up the yen. Takuji Aida said Tokyo could deploy its foreign exchange reserves to buy yen, and he urged the use of fiscal stimulus even if it raises the government debt burden.
Aida framed the debate in explicit trade off terms. He noted that a weaker yen can boost export competitiveness, but it also raises the domestic price of imported goods and intensifies inflationary pressure on households. His remarks follow public statements by the finance minister that signalled intervention remains on the table, and come amid market anxiety after the currency has slid roughly six percent since the new administration took office earlier this month.
The intervention proposal marks a notable shift in rhetoric from policymakers who for years tolerated a relatively weak yen as part of a competitiveness strategy. Using foreign exchange reserves to buy yen would be a direct market action aimed at reversing or stabilizing the recent depreciation. Intervention tends to produce only short to medium term effects unless it is sustained or accompanied by broader policy changes. Observers say coordination between the finance ministry and the central bank would be essential for any credible campaign.
Aida also advocated fiscal stimulus to offset the pain of higher import prices. That prescription confronts a long standing fiscal dilemma. Japan runs one of the highest public debt ratios among advanced economies, with general government debt well above two hundred and fifty percent of gross domestic product. Explicitly accepting more debt to blunt inflationary harm signals a willingness by some in the new administration to prioritize immediate household and price stability over medium term fiscal consolidation.
Markets are likely to parse the comments for clues about the scope and timing of any intervention. Currency intervention can move spot markets and dampen volatility, but it can also prompt shifts in expectations about monetary policy and sovereign finances. A more interventionist posture could ease the pass through of import prices to consumer inflation, potentially giving households relief from higher energy and commodity costs. At the same time it could tighten conditions for exporters who benefited from the weaker currency.
International reaction will also be relevant. Large scale currency operations attract scrutiny from trade partners and international institutions when they are seen as altering competitive positions. Tokyo would need to balance domestic pressures to limit import driven inflation against the diplomatic and market consequences of reasserting control over the yen.
The debate opened by Aida encapsulates a wider policy question for Prime Minister Takaichi. Policymakers must weigh the short term benefits of a stronger currency and fiscal support for households against the long run challenge of Japan's elevated debt. How Tokyo resolves that tension will shape markets and the daily economic experience of Japanese consumers in the months ahead.
