Japan’s Finance Minister Satsuki Katayama said oil price swings are affecting foreign exchange markets. She also said she is seeing speculative moves in financial markets.
Katayama spoke after the first day of the G7 Finance Ministers meeting in France. She said Japan would closely monitor markets and take appropriate action against forex volatility.
Global Imbalances And Financial Stability
She said she told G7 partners action is needed to correct global imbalance. She also said risks linked to Mythos need to be addressed, with the G7 set to discuss steps ahead of next month’s summit.
Katayama said the G7 should be united against China’s export controls on critical minerals. She said the G7 communique is likely to include a statement on pricing over critical minerals.
She said the G7 is not considering coordinated action on bond sell-offs. She said each country is responsible for its own market situation.
Katayama said Prime Minister Takaichi asked her to consider how to finance a planned extra budget while mitigating risks. She did not give figures or a timeline.
Oil Volatility And Yen Market Pressure
We are seeing clear signs of distress between the oil and currency markets. WTI crude futures have been swinging in a wide $15 range this quarter, recently hitting a high of $98. This volatility is directly spilling into currency pairs like USD/JPY, which has seen its 30-day realised volatility jump to 14%, a level not seen since the intervention scares of 2024.
The warnings about taking action on forex volatility should be taken seriously, but we must also consider the government’s need to finance a new budget. This creates a conflict, suggesting that while intervention to strengthen the yen is possible, any rally could be short-lived. Options traders should consider buying straddles on USD/JPY to profit from a large move in either direction.
The G7 is not united on supporting bond markets, meaning we should expect monetary policy divergence to continue. The spread between 10-year U.S. Treasuries and Japanese Government Bonds has already widened to over 400 basis points, its highest in two decades. This environment makes shorting the yen against the dollar a fundamentally attractive carry trade.
Broader market uncertainty is being driven by geopolitical and systemic risks. The VIX index has remained stubbornly above 22 amid concerns over both the “Mythos” risk and China’s control over minerals. Traders should consider buying protection, such as VIX calls or puts on major indices, as a hedge against a sudden market downturn.
The focus on China’s export controls is directly impacting industrial commodities and related equities. Prices for gallium and germanium are already up 35% since Beijing’s last announcement in February 2026. This suggests placing bearish bets on semiconductor and EV manufacturers who are heavily reliant on these inputs.
