[Correspondent’s Column] A Leader’s Words Weigh as Much as Policy

On January 31, in Kawasaki, Kanagawa Prefecture, Japan, the first weekend campaign rally for the House of Representatives of Japan was under way. Despite the chilly weather, a crowd gathered like a cloud. Addressing them, Prime Minister Sanae Takaichi opened by saying, "A weak yen is not necessarily a bad thing." She went on to stress, "It is a major opportunity for export industries. The Foreign Exchange Fund Special Account is practically beaming."
Her remark was brief and came in the middle of a stump speech, but its impact was long-lasting. Once the comment spread through the media, the foreign exchange market reacted immediately. In New York that day, the USD/JPY exchange rate closed at 154.75 yen per dollar, up 1.70 yen from the previous session, meaning the yen had weakened.
The next morning, before the market opened, Prime Minister Takaichi clarified that she was "not welcoming a weak yen." Even so, investors began to expect that the government would no longer be as active in defending the yen’s value. That perception fueled selling pressure on the yen, and the weak-yen trend has continued for four straight days.
Inside the Japanese government, the sense of embarrassment appears to be considerable. A government official said, "It wasn’t in the prepared speech," and added, "It’s unclear why that phrasing was needed in the first place." At a time when Japan’s Ministry of Finance (MOF) was working behind the scenes to rein in an excessive slide of the yen into the 159-per-dollar range, the prime minister’s words were read as moving in the exact opposite direction of the bureaucrats’ efforts. The Japanese government is also reported to have offered an explanation to the United States about her remarks.
This comment drew particular attention because of its timing, coinciding with a sharp rise in Japanese government bond yields. Fiscal anxiety was already growing due to large-scale spending and tax cut pledges. When a weaker yen and higher bond yields appeared at the same time, the United States also voiced concern. Some even warned that a spike in Japan’s interest rates could trigger a "triple slump" in U.S. markets. In effect, one national leader’s off-the-cuff remark had tugged at the links that connect global financial markets.
What is interesting is that this kind of bluntness is also part of what makes Takaichi popular. Even though a weaker yen can heighten inflationary pressure and push up living costs, online communities are sharply divided over her comments. On Reddit, many posts defended the prime minister, arguing, for example, "Food prices are high not only because of the weak yen but also due to other problems," and, "Given how much industry figures have complained about a strong yen in the past, her remarks are consistent." Financial markets, however, do not read "frankness"; they read "signals." Because they interpret direction before context, the risk created by this remark is substantial.
Around the same time, South Korea, which was also experiencing a weaker currency, saw comments on the exchange rate draw market attention. President of South Korea Lee Jae-myung said at his New Year’s press conference this year that the US dollar–South Korean won exchange rate could soon fall back into the 1,400-won range. Right after his remarks, the rate briefly moved lower. The president’s words had reset market expectations.
Placing the Japanese and South Korean cases side by side makes it clear how a leader’s words shape expectations about exchange rates. Prime Minister Takaichi spoke of the "benefits of a weak yen," and the market interpreted that as "tolerating yen weakness." President Lee mentioned the "possibility of a lower exchange rate," and the market took that as a "commitment to stabilizing the won." Even without a formal policy announcement or an explicit statement of intent, the message the market heard was unmistakable.
In this sense, a leader’s remarks carry two layers of meaning. They are political messages aimed at domestic voters, and at the same time they are policy signals sent to global financial markets. In areas that are especially sensitive to expectations, such as exchange rates, a single phrase from a leader can move vast sums of money.
For South Korea as well, where downward pressure on the won continues, the weight of a leader’s language is being felt once again. Words remain on the record, and markets remember that record. Those memories shape future exchange rates. An exchange rate is a number, but behind that number lie words. A leader’s words are as heavy as policy itself.
sjmary@fnnews.com Reporter