After two weeks of decline, the Japanese yen is approaching the 150 level, will Japan intervene again?

Wallstreetcn
2024.10.15 07:02
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Some opinions believe that the government will not intervene unless the Japanese yen falls below 160. Junzaburo Mimura, Vice Minister of Finance of Japan, stated that he is closely monitoring the movements of the foreign exchange market, including speculative trends. Due to Japanese Prime Minister Shizo Abe's support for loose monetary policy and the expectation of a Fed rate cut being suppressed by CPI data, the yen still faces downward pressure

The Japanese yen exchange rate is hovering near a key level, with the risk of Japanese government intervention back in investors' sights.

The market shows that the yen has been falling for the second consecutive week, approaching the 150 level on Monday. As of the time of writing, the USD/JPY is at 149.63.

Earlier this month, Japan's current Vice Minister of Finance, Junzaburo Mimura, who took over from Kanda Man, stated that he is closely monitoring the movements of the foreign exchange market, including speculative trends.

Japan's new Finance Minister, Katsunobu Kato, also warned that sudden fluctuations in the yen could have negative effects on businesses and households.

Various signs indicate that the speed at which the US-Japan interest rate differential is narrowing may not be as fast as expected, and the yen still faces downward pressure.

Japan's new Prime Minister, Fumio Kishida, previously stated that he hopes to maintain an accommodative monetary policy as the domestic economy is not ready for rate hikes; on the other hand, strong US CPI data has dampened expectations of rate cuts, with Federal Reserve Governor Waller recently stating a hawkish stance, saying that future rate cuts will require "more caution."

Takuya Kanda, research director at Tokyo's Gaitame.com Institute, believes that the key level to watch for the softening trend of the yen is at 152. He stated:

"This marks a key level for the yen, as the last time it broke through this level, the yen quickly fell to 160."

For reference, the last time the Japanese government intervened in the market, the yen softened to 161.95.

However, some believe that the current foreign exchange levels are not yet at a point where the Japanese government would intervene.

Eiichiro Miura, head of the Strategic Investment Department at Nissay Asset Management, commented:

"Unless the yen falls below 160, the government will not intervene."

According to CFTC data as of October 8th, leveraged funds' net long positions in the yen fell for the second consecutive week, indicating a weakening bullish sentiment towards the yen

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