Yen Battles Back: Japan's Fiscal Policies and Currency Intervention

The Japanese yen weakened against the dollar amidst investor concerns over possible intervention to stabilize the currency. Despite a Bank of Japan rate hike, expansive fiscal policies and inflation concerns remain. Officials warned of potential intervention, while Fed rate cuts and cryptocurrency gains influenced the broader currency market.

The Japanese yen decreased against the U.S. dollar on Friday as market players anticipated potential intervention to support the yen. Despite a recent interest rate increase by the Bank of Japan, the yen remains weak due to concerns over Japan's expansive fiscal policy.

On Friday, Japan's government announced record spending plans for the next fiscal year but aimed to restrain debt issuance, highlighting Prime Minister Sanae Takaichi's challenge of boosting economic growth while managing inflation above the central bank's target. Core consumer inflation in Tokyo showed a slight decrease in December.

Finance Minister Satsuki Katayama issued a strong warning regarding Tokyo's readiness to intervene to stop sharp yen declines. Elsewhere, the dollar index moved slightly higher, with the euro and sterling displaying minor fluctuations. Meanwhile, bitcoin rose in value amidst the ongoing currency market dynamics.

(With inputs from agencies.)