Trump's Middle East remarks trigger global asset turmoil: Yen approaches 160 "life-or-death line," Japanese Finance Minister warns of taking "bold action"

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Source: Zhitong Finance Network

Japan’s Finance Minister said that remarks by U.S. President Donald Trump about the situation in the Middle East earlier this week have had a major impact on financial markets. Before the U.S. side released data, the minister expressed concern about increasingly intensified volatility in both the exchange-rate and crude oil futures markets, and issued another warning to speculators.

Japan’s Finance Minister, Gloong Moon KATAYAMA, said to reporters on Friday, “Trump’s remarks have had a fairly significant impact on global markets—including all asset classes,”“Speculative activity in crude oil futures and the foreign exchange market is increasing, and volatility has therefore risen sharply.”

Katayama added, “The government is prepared to take measures across all fronts.” She issued another warning to speculators, saying it may take “bold action”—a phrase that is widely seen as a code word for intervention in the FX market. Her reference to crude oil futures indicates that authorities are keeping a continuous watch on market developments beyond exchange rates.

Before Katayama made these remarks, the yen to U.S. dollar exchange rate had touched 159.74. Earlier, Trump’s comments pointed to the possibility that the Middle East conflict could further escalate.

On Thursday, Trump issued a new threat, saying he would target Iran’s infrastructure to force Tehran back to the negotiating table; and just the day before that, he vowed to continue the war—an outlook that has already pushed up oil prices, U.S. Treasury yields, and the U.S. dollar.

The yen will face another test later on Friday evening, when the United States will release the latest batch of labor data. If the data comes in stronger than expected, it could reinforce expectations that the Federal Reserve will delay rate cuts, which in turn may further lift the U.S. dollar and put additional pressure on the yen.

After Katayama’s remarks, the yen exchange rate in the Tokyo market on Friday’s early trading hours fluctuated around 159.67.

Amid rapidly changing conditions in the Middle East, the impact of Japan’s warning on the yen has been relatively short-lived. Just a few days after the warning from the top FX official at the Ministry of Finance helped stem the slide, the yen exchange rate has returned to the danger zone, hovering not far from the 160 per-dollar threshold.

Since the end of 2022, Japanese authorities have spent more than 24 trillion yen (about $150 billion) to intervene in markets to support the yen. The most recent round of operations took place in July 2024, when the yen depreciated and fell below the 160 level. Before that, in April and May of the same year, Japan carried out the largest yen support intervention in history.

UBS Group’s strategists expect that, although officials have strengthened their intervention rhetoric, the yen’s depreciation will continue. Under a scenario of “ongoing disruption,” they even foresee the yen/U.S. dollar exchange rate reaching 175 by the end of the year.

Katayama said that officials from the Group of Seven (G7) attending Monday’s online meeting generally believe that, regardless of how the situation in the Middle East develops, market volatility will remain high in the short term.

Katayama said, “At present, the global and Japan’s economic order remains stable, but it is commonly acknowledged that the outlook is still unclear,”“We need to take every possible measure to reduce this uncertainty as much as we can.”

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责任编辑：朱赫楠