The Bank of Japan is in a difficult spot in a tense tug-of-war between the central bank and the government – will we see intervention in ?
USD/JPY Key Points
Japan’s new Prime Minister Sanae Takaichi appears to be in favor of a weaker yen as a way to spark inflation…while the Finance Minister is threatening intervention to support it
This puts the Bank of Japan in a difficult spot and sets up a tense tug-of-war between the central bank and the government, though outright intervention isn’t likely until closer to 158.00 in USD/JPY in my view.
AUD/JPY remains within its well-established bullish trend, probing its 1-year high near 101.25 ahead of AU jobs data.
It was a busy Asian session for Japanese policymakers jawboning, setting up a tense tug-of-war over the yen in the days and weeks to come.
In a repeat of past verbiage, Japan’s Finance Minister noted that the currency was seeing “one-sided, rapid moves of late” and that “[t]he government is watching for any excessive and disorderly moves with a high sense of urgency.” For those who don’t follow Japanese economic commentary closely, this is the exact terminology that past Finance Ministers have used to warn the market that the government was getting closer to intervening directly into the market to buy yen and support the currency.
While that is ostensibly a potential bullish catalyst for the yen (bearish USD/JPY) in the coming days, Japan’s new Prime Minister Sanae Takaichi appears to be in favor of a weaker yen as a way to spark inflation.
Earlier on Wednesday, Takaichi vowed to “create a strong economy. This is a matter that affects monetary policy in a big way, so we hope to coordinate closely with the Bank of Japan…
USD/JPY and AUD/JPY Break Out – Intervention in Play?
