【Dollar/Yen intervention vigilance rekindled; what matters now is not trend strength but the seriousness of authorities】
【USD/JPY is re-igniting “no-intervention vigilance”; now the key is authorities’ seriousness rather than the strength of the trend】
In the current foreign exchange market, the view on USD/JPY has changed significantly over the past few days. Previously the mainstream view was that “as long as there is a gap in U.S.-Japan interest rates, USD/JPY won’t easily fall,” but recentlysurveillance of intervention by Japanese authoritieshas suddenly intensified, turning market participants’ eyes from “continuation of a yen-selling trend” to “where authorities may move again.” According to Reuters, during May 4 trading, the yen briefly strengthened to as high as¥155.69 per dollar, raising the possibility of intervention continuing from last week. Japan is in Golden Week, when market liquidity is thin, and price moves can be amplified.
In fact, Reuters reported on April 30 that Japantook yen-buying intervention for the first time in about two years. At that time, the yen rose as much as about 3% against the dollar, and the USD/JPY that had been testing the 160 level was pushed back abruptly. However, intervention itself does not necessarily change the market’s fundamental direction. There is a strong view in the market that unless there is a change in BOJ policy or a decline in oil prices, simply intervening will not sustain a yen depreciation reversal. This time as well,a short-term discipline effectanda medium-term sustainabilityneed to be considered separately.
Behind this is Japan’s policy interest rate and the energy environment. The BOJ left policy rates at 0.75%0.75%at the April 28 meeting, but internally there is strong caution about inflation, with three dissents arguing for a rate hike to 1.0%. Meanwhile, as Middle East tensions push crude prices higher, yen weakness tends to feed inflation in resource-importing countries like Japan. Reuters says the yen’s downside pressure this time stems froma low-rate environment, higher crude prices, and concerns about fiscal expansion. In other words, the current USD/JPY is not just about interest rate differentials; it is a market where “policy,” “commodity prices,” and “government responses” collide simultaneously.
The U.S. side is not in a mood to sell the dollar aggressively either. Some Federal Reserve officials warn that supply concerns from the Iran conflict and higher energy prices are pushing up inflation, andwe cannot rule out rate hikes even as rate cuts are considered. According to Reuters, the president of the Minneapolis Fed, Neel Kashkari, said that the uncertainty caused by the war is so large that the Fed cannot issue a clear rate guidance. Moreover, recent U.S. inflation indicators have been viewed as “bad news,” so there remains a foundation supporting the dollar. Therefore, even if USD/JPY falls sharply on intervention worries, it does not necessarily turn into a sustained downtrend, making the current environment very difficult.
What individual investors should be mindful of now is not only the direction of the trend, butto assess the seriousness of the authorities and market liquidity. Especially during Japan’s holidays and in thin trading hours, prices can swing more easily, and investors can be caught in sudden shifts. It is important now to focus on times when liquidity returns, such as during the London early hours or early New York hours, and determine whether news is temporary or a factor leading to a future policy change. The current USD/JPY is both a trend market and apolicy risk market. Whether you can recognize that will largely influence this week’s performance.