06:10 AM EST, 11/12/2025 (MT Newswires) -- The modest depreciation of the US dollar (USD) on Tuesday has been surpassed again by the depreciation of the yen (JPY) and USD/JPY continues to grind slowly higher toward the 155 level, said MUFG.

Japanese Finance Minister Satsuki Katayama has again warned on excessive yen depreciation, stating that the ministry of finance was "seeing one-sided, rapid currency moves of late" and that the government is "watching for any excessive and disorderly moves with a high sense of urgency."

The tone of these remarks is quite similar to comments made last week, so in reality this doesn't really signal an increased level of concern and as such market participants won't give these comments too much additional attention, wrote the bank in a note to clients. The acknowledgement in her comments that it's becoming clearer that there are "negative parts" to yen weakness is a shift, but doesn't in MUFG's view signal imminent action.

It will be very difficult for Japan to convince the markets at this stage of its intention to intervene to strengthen the yen when its rhetoric on economic policy suggests the implementation of policies that are inflationary, stated the bank.

This policy direction is being led by the top and Prime Minister Sanae Takaichi's comments on Tuesday were telling when she stated that "it cannot be said that the Japanese economy has escaped deflation.". Japan's headline inflation rate turned positive on a sustained basis in September 2021 and as such MUFG has had four years of positive inflation.

It is the same for the core nationwide CPI as well. Excluding all food and energy -- similar to core CPI in the United States -- inflation has been positive for three-and-a-half years. A draft of the fiscal stimulus plan has revealed that "necessary expenditures to implement required policies will be carried out without hesitation" underlining more focus on spending and less on fiscal consolidation, added the bank.

The yen underperformance could well continue, according to MUFG. Intervention will become a more credible threat at levels above 155.00 which should slow the advance, while the best hope of a retracement in USD/JPY is likely a more notable decline in U.S. yields, possibly on the back of weak NFP data.