Toyoo Gyoten, a former Japanese foreign exchange official, has raised alarms about inflation because of the weak yen. Low interest rates in Japan are a major factor in this decline. Gyoten warned that if the trend continues, inflation could rise further. Historically, the yen has been weak, but he believes it has the potential to strengthen significantly.

Role In Plaza Accord

Gyoten was a key figure in the 1985 Plaza Accord and was the director-general of the International Finance Bureau at Japan’s Ministry of Finance. He opposed Japan’s decision to sell the yen in 2010, a rare move since 2004. He stated, “Japan’s interest rates are simply too low,” which clearly adds to the yen’s weakness. With USD/JPY trading close to 168.50 this week, the pressure is increasing. If this trend continues, it may lead to faster inflation, and the Bank of Japan needs to take this into account. This ongoing weakness could significantly increase import costs and overall inflation, which has been stubbornly high. The latest national core CPI data for August 2025 showed a 2.8% year-on-year rise, marking the sixth straight month above the Bank of Japan’s 2% target. This steady inflation puts the central bank in a tough spot.

Possibility Of Intervention

For derivative traders, this indicates a rising chance of a policy shift or even direct intervention. It’s worth considering buying USD/JPY put options to benefit from a sudden yen strengthening, with a target around the 160 level in the next month or two. In the current climate, holding long yen positions through options has become an appealing hedge against an unexpected move by the Bank of Japan. Looking back, the yen is still notably weak, and there’s no strong reason it shouldn’t increase in value. Historical intervention in 2010, when USD/JPY was around 83, and levels near 115 before the global hiking cycle began in 2022 highlight the potential for a major correction. The risk of being short the yen at these levels continues to grow. Create your live VT Markets account and start trading now.

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