As Japan confronts rising inflation and a plummeting yen, Prime Minister Sanae Takaichi's recent remarks on Taiwan have injected fresh volatility into markets and strained regional diplomacy. The developments come at a critical juncture for Asia's second-largest economy, which is already battling sluggish growth and household financial pressures.
Yen Hits Historic Lows Amid Market Uncertainty
Finance Minister Satsuki Katayama issued urgent warnings on November 21 about the yen's accelerated decline against the U.S. dollar, with Bloomberg characterizing it as Tokyo's strongest intervention alert this year. The currency's 18% depreciation since January has sharply increased import costs for energy and food, squeezing small businesses and consumers alike.
Diplomatic Fallout Compounds Economic Woes
Analysts link renewed market jitters to Takaichi's November 19 speech reaffirming security concerns about “stability across the Taiwan Strait.” While stopping short of explicit policy changes, her comments drew swift diplomatic responses from Beijing and prompted rare public criticism from Japanese business leaders. Sumitomo Mitsui Banking Corporation strategists warn that potential trade adjustments could further pressure Japan's $5.3 trillion economy.
Central Bank Sounds Inflation Alarm
Bank of Japan Governor Kazuo Ueda recently cautioned that yen weakness is fueling domestic price hikes, with inflation projections revised upward to 3.1% for Q4 2025. “The pass-through effect from currency fluctuations is becoming more pronounced,” Ueda stated during a press briefing, while maintaining the BOJ's ultra-loose monetary stance.
As Tokyo weighs currency intervention under existing U.S.-Japan agreements, business leaders urge political restraint. “Economic stability requires careful statesmanship,” noted Keidanren Chairman Masakazu Tokura, reflecting corporate concerns about prolonged market turbulence.
