Given the prevailing fundamental backdrop, there’s never going to be a perfect time for Tokyo officials to intervene in the currency market. So if they want to send a message to markets that it isn’t going to be a free ride in driving up USD/JPY, they might think now’s a good time as any to challenge that. That especially since the pair is now catching a bounce after testing a key technical level here.
USD/JPY is up 0.3% on the day to 154.65 and that is still some distance from its drop from Friday, when the pair briefly clipped above 159.00 after BOJ governor Ueda’s press conference.
The speculated ‘rate check’ is keeping market players in line but unless there is a clear shift in the fundamental backdrop driving the Japanese yen to the downside, the ability to turn that trend will be limited.
Japan’s ministry of finance (MOF) surely knows that and they know that any intervention will also not have the desired effect of being permanent given the above. Perhaps they might wait and save up ammunition to use that later when USD/JPY continues to run up again. However, that’s a dangerous game to be playing and it sets a precedent for future cases when they do need to use a ‘rate check’ to keep traders in check again.
As such, any modest rebound in USD/JPY from hereon looks to be an invitation for them to hit back with actual intervention. So, I’d be extremely wary.
As a reminder as well, the last time the MOF intervened to prop up the yen currency was back in 11 July 2024. And at the time, they did so at the start of US trading around 1300 to 1330 GMT. And back in 22 September 2022, they did so late in Asia trading around 0800 GMT.
There’s no set precedence or timing but at least it gives us a clue that they are prepared to act whenever they see fit.
This article was written by Justin Low at investinglive.com.