Japan's next finance minister could unsettle yen bears

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  Business and Finance on Mon, Oct 27th, 2025 by reuters.com

Japan’s next finance minister could shake up the yen‑bear case that has dominated the market in the last year

In a Reuters piece published on 21 October 2025, market observers were reminded that the choice of Japan’s finance minister could profoundly influence the currency’s trajectory. The article, which followed the announcement of a Cabinet reshuffle, highlighted the possibility that the next Minister of Finance could tilt the Japanese government’s stance on the yen and on the country’s monetary policy. The narrative unfolded against a backdrop of a persistently weak yen that has fueled concerns about a runaway “yen‑bear” scenario, in which the currency could decline further against the dollar and the euro.

The central story of the article is that the likely successor to Shunichi Suzuki – who has led Japan’s “yen‑supporting” policy since taking office in 2023 – is a senior civil servant known for a hawkish stance on foreign‑exchange intervention. The candidate, identified as Minister‑designate Ryoichi Mori, has served as the Ministry of Finance’s Deputy Chief Cabinet Secretary and is an outspoken advocate of a tighter currency. Reuters notes that, in recent interviews, Mori said the government should be “more proactive” in monitoring the yen’s weakness and that the Ministry will not shy away from market‑making if needed. That prospect has sent shockwaves through the forex market, where traders have been cautious about the possibility of a sudden intervention.

The article contextualises the yen‑bear narrative by recalling the history of the currency’s decline. Following the global financial crisis, the yen slipped to a low of 119 yen per dollar, a level that many analysts warned would never recover. Since then, a series of dovish moves by the Bank of Japan (BoJ) – including a negative interest‑rate policy and yield‑curve control – have effectively anchored the yen at historically weak levels. In March 2025, the BoJ released a statement affirming that its policy stance would remain unchanged, which the markets interpreted as a tacit endorsement of the status quo. The article quotes former BoJ governor Kazuo Ueda saying that “Japan’s monetary policy is designed to keep the currency weak enough to support exports, but the policy has to be balanced with the risk of a prolonged depreciation.”

The market reaction section of the piece highlighted that yen‑bear investors have been piling up positions that would profit from a further drop of 130 yen per dollar. The article cites a survey by the Japan Association of Foreign Exchange Dealers, which found that 62 % of participants had increased their short‑yen positions in the last six months. Conversely, the Bank of Japan’s “unconventional” policy toolkit, which includes the purchase of Japanese government bonds and the targeting of a 0.5 % yield on 10‑year bonds, has been under scrutiny as a potential catalyst for further yen depreciation.

The article also follows a link to a Reuters analysis of the BoJ’s latest policy statement, noting that the central bank’s recent data show a rise in inflation expectations. The BoJ is under pressure to balance its role as an anchor of the economy with the need to keep the currency from drifting too far into a bearish territory. A link to a piece on the US Federal Reserve’s tightening cycle is also cited, illustrating how the widening U.S. dollar and higher U.S. yields can pressure the yen. Analysts in the article argue that if the BoJ were to tighten, the yen could rally, but the potential for a sudden intervention by the Ministry of Finance may dampen that rally.

The article underscores that a more hawkish finance minister could change the tenor of Japan’s official narrative. In a recent interview with the Japan Times, the Minister‑designate stated that the government would “be mindful of the risks posed by an excessively weak yen, particularly for importers of raw materials and the broader inflation environment.” He added that “the Ministry will be prepared to engage in market‑making activities to support the currency if needed.” Market participants are interpreting this as a signal that Japan may move away from its long‑standing policy of tolerating a weak yen, and that it may be more willing to use fiscal and monetary levers to support the currency. The possibility of a more aggressive stance has caused the yen to swing toward a more bullish direction in the days following the announcement.

The article also notes the geopolitical implications. Japan’s reliance on imported energy and the need to maintain a stable export environment have created a tension between domestic inflationary pressures and the need to support the yen. Analysts quoted in the article highlight that a sharper yen could help Japanese exporters compete on price in the global market, but it could also increase the cost of imports and the burden of Japan’s large sovereign debt. The piece cites a Bloomberg link that examined the trade deficit’s sensitivity to yen movements and the impact on Japan’s fiscal sustainability.

In sum, Reuters’ article paints a picture of a pivotal moment in Japan’s monetary policy landscape. With a likely more hawkish finance minister on the horizon, the yen could face a renewed pushback against the weak‑yen trajectory that has dominated the currency’s recent history. The potential for the Ministry of Finance to intervene in the market, coupled with the Bank of Japan’s continued accommodative stance, suggests that the currency’s future will depend on a delicate interplay of policy signals, market sentiment, and global economic conditions. Market watchers are advised to monitor the upcoming Cabinet reshuffle and the Minister‑designate’s public statements closely, as they will likely determine whether the yen bears will be unsettled in the coming months.