Japan yen intervention returned to focus on Wednesday as USD/JPY traded at 161.75 and stayed close to the 2024 high near 161.95.
JP Morgan said Japan’s ministry of finance needs to act firmly at current levels or risk another sharp slide in the yen. The bank said the move above 161 late last week quickly pushed the pair toward 162, a level not seen in 40 years. It also said price action on Thursday night showed signs of a rate check, although the rebound was strong, much like an earlier suspected episode after the pair cleared 160.
The bank said Japan is nearing an inflection point. It added that anything short of bold action could trigger a fresh acceleration in yen weakness. JP Morgan also said it has kept hearing from Katayama, but that Mimura is the official markets need to hear from.
Japan Yen Intervention Scope
At the same time, Credit Agricole set out how much room Japan may still have to step into the market. Citing ministry of finance data released last week, the bank said Japan still holds $1.3 trillion in foreign exchange reserves for intervention. Therefore, it said Tokyo could intervene more than 15 more times on the same scale as in April and May.
However, Credit Agricole also said the same reserve data suggest Japan likely sold U.S. Treasuries to fund its record $73 billion of intervention in the April-May period. In addition, the bank noted that U.S. Treasury Secretary Scott Bessent has said before that he would rather see Japan support the yen through higher rates than through direct market action. As a result, investors may think U.S.-Japan politics could curb the ministry’s ability to intervene.
Reserve Limits Add to Market Debate
The article also noted that Japan’s reserve stock is not fully liquid cash. It said about $1.2 trillion is available, but more than 80% sits in securities, mainly U.S. Treasuries and other foreign government bonds. Because of that, Japan does not have an unlimited cash pool if it uses up deposits.
That matters because selling Treasuries to raise cash could lift U.S. yields. In turn, higher yields could support the dollar and work against Tokyo’s aim of lowering USD/JPY. For now, the pair continues to test the highs as markets weigh the odds of japan yen intervention.
You can access our other news on Forex markets and global market developments here.
