Trump's comments on the Middle East caused global asset volatility: the yen is nearing the "life and death line" of 160, and Japan's finance minister warns of taking "bold action".

Japanese Finance Minister said that the comments made earlier this week by US President Trump on the situation in the Middle East had a significant impact on the financial markets. Before the US released data, the minister expressed concerns about the increasing volatility in the exchange rate and oil futures markets, and once again issued a warning to speculators. Japanese Finance Minister Saaya Katayama told reporters on Friday, "Trump's remarks have had a significant impact on global markets - covering all asset classes," "Speculative activity in oil futures and foreign exchange markets is increasing, and as a result, volatility is increasing significantly." Katayama added, "The government is prepared to take action in various areas." She again warned speculators, saying that "bold actions" could be taken - which is often seen as a code for intervention in the currency market. Her mention of oil futures indicates that authorities are monitoring market trends other than exchange rates. Before Katayama's comments, the exchange rate of the yen against the US dollar reached 159.74. Prior to this, Trump's comments suggested that the conflict in the Middle East could escalate further. On Thursday, Trump issued a new threat, saying he would strike Iran's infrastructure to force Tehran back to the negotiating table; just the day before, he promised to continue the war, a trend that has pushed up oil prices, US bond yields, and the US dollar. The yen will face another test later on Friday, when the US will release its latest batch of labor data. If the data is stronger than expected, it could reinforce expectations that the Federal Reserve will delay cutting interest rates, potentially further boosting the dollar and putting additional pressure on the yen. Following Katayama's remarks, the yen exchange rate in early trading in Tokyo on Friday fluctuated around 159.67. Amid rapidly changing developments in the Middle East, Japanese authorities warned that the impact on the yen is likely to be short-lived. Just a few days after the warning from the Finance Ministry's top foreign exchange official helped curb the decline, the yen exchange rate has returned to dangerous territory, hovering near 160 against the US dollar. Since the end of 2022, Japanese authorities have spent over 24 trillion yen (about $150 billion) intervening in the market to support the yen. The latest round of operations took place in July 2024, when the yen devalued below the 160 mark. Prior to that, in April and May of the same year, Japan conducted its largest-ever yen-supporting intervention operation. Strategists at UBS Group predict that despite officials strengthening intervention rhetoric, the depreciation of the yen will continue. In a scenario of "continued disruptions," they even foresee the dollar-yen exchange rate reaching 175 by the end of the year. Katayama said that officials from the Group of Seven (G7), who participated in an online meeting on Monday, generally believe that market volatility will remain high in the short term regardless of how the situation in the Middle East unfolds. Katayama said, "Currently, the global and Japanese economic order is still stable, but the outlook remains uncertain," "We need to take all possible measures to reduce this uncertainty as much as possible."