Prime Minister Takaichi Defends Weak Yen Benefits Ahead of Snap Election

Japanese Prime Minister Sanae Takaichi recently characterized the struggling yen as a strategic buffer against foreign tariffs during a campaign speech for the February 8 election. Her comments highlight a potential policy split within the government, the Finance Ministry remains poised to intervene in currency markets to stabilize the exchange rate.

Economic Pressures Mount as Election Approaches

The Japanese currency has lost over one-third of its value since early 2021, currently trading near 18-month lows against the US dollar. This depreciation drives cost-push inflation, prices for imported energy and food have surged to roughly 3 percent annually. Although the Bank of Japan raised interest rates to 0.75 percent in early 2026, real borrowing costs remain negative due to inflation rates. The structural shift from a trade surplus to persistent deficits fueled by high energy costs has intensified market volatility, this creates a difficult environment for voters heading to the polls.

Takaichi Touts Export Gains While Clarifying Policy Stance

Prime Minister Takaichi initially framed the current currency valuation as a "major opportunity" for key industries including automobiles and food sectors. She argued that a lower exchange rate acts as a buffer against potential United States tariffs, this boosts corporate profits for exporters. However, she later adjusted her message on social media platform X, she clarified that her goal is economic resilience rather than specific devaluation. She emphasized that a rapidly strengthening currency could lead to the "hollowing out" of domestic manufacturing, citing historical unemployment spikes caused by past appreciation.

Internal Policy Divergence Emerges

This perspective clashes with Finance Minister Satsuki Katayama, the ministry has consistently threatened market intervention to curb "excessive foreign exchange volatility." While Takaichi focuses on the advantages for the Foreign Exchange Fund Special Account and export giants, the Ministry of Finance prioritizes stability to protect consumer purchasing power. This mixed messaging suggests a lack of coordination at the highest levels of government just days before the general election, markets are reacting nervously to the apparent discord between the premier and her finance officials.

Households Face Rising Costs Despite Corporate Gains

Large corporations with significant overseas earnings stand to profit substantially from the current exchange rates, the tourism sector also benefits as Japan becomes a more affordable destination for foreign visitors. Conversely, average households face shrinking real incomes as the cost of essential goods rises. Opposition leaders argue that the administration is prioritizing corporate profits over the financial well-being of ordinary citizens who struggle with daily expenses.

Investors are now closely watching for actual market intervention measures after the election concludes. The results on February 8 will likely determine if the government pursues aggressive fiscal policies or shifts toward prioritizing currency stabilization.