Yen tumbled broadly after reports that Japanese Prime Minister Sanae Takaichi expressed reluctance to raise interest rates further during her February 16 meeting with BoJ Governor Kazuo Ueda. The report, carried by Mainichi Shimbun and citing multiple unnamed sources, suggested a firmer stance against tightening than previously seen.
According to the report, Takaichi emphasized that monetary policy must not “extinguish the fire” of economic recovery supported by her administration’s stimulus measures. Her position was described as stricter than at the prior November 2025 meeting.
The BoJ is widely viewed as recognizing the need for further tightening to normalize the financial system and address persistent Yen weakness. Yet with Takaichi strengthened politically after a landslide lower house victory, the balance between monetary independence and political priorities is under scrutiny.
The timing of the leak is notable. With Japan’s annual Shunto wage negotiations due in March, markets have been pricing a high probability of the next rate hike in Q2, particularly April. The deliberate nature of the Mainichi report suggests an attempt by the administration to cap rate expectations ahead of wage outcomes.
March has already been seen as too early for a move, as policymakers would prefer to assess wage negotiation results first. But if Takaichi’s reluctance proves durable, June may become the more realistic window for any additional tightening.
This creates an inherent policy tension. Takaichi seeks to avoid choking off recovery through higher rates, yet Japan also faces pressure from a weakening Yen. Balancing lower borrowing costs with currency stability presents a narrowing path.
Some analysts speculate that if rate hikes are delayed, authorities may lean more heavily on FX intervention should USD/JPY approach the 160 level, the line in the sand for Takaichi.
Technically, USD/JPY’s sharp jump reinforces the view that recent price action from 159.44 represents a near term sideway consolidation pattern only. The broader uptrend from the 139.87 low in 2025 remains intact, suggesting eventual resumption toward and potentially beyond 159.44 . But then risk of intervention will surge as USD/JPY marches on.
