The Bank of Japan (BOJ) appears to have conducted a significant yen-buying intervention on Thursday, with money market data suggesting the scale reached around 5 trillion yen, equivalent to approximately $32 billion [1]. This marks Japan’s first intervention in nearly two years, coinciding with a sharp rally in the yen against the U.S. dollar [1]. ING’s Chris Turner notes that Japanese authorities likely acted to push USD/JPY back below the 160 level, mirroring the pattern of sizeable foreign exchange sales seen in late April and early May of 2024 [2]. Turner references previous BOJ interventions, including over $30 billion in FX sales on April 29, 2024, followed by a smaller round on May 1, 2024 [2].
The intervention is seen as a response to USD/JPY trading above 160 ahead of global May Day holidays, with Turner suggesting that investors should brace for further potential interventions in the coming days, especially given the ongoing public holidays in Japan and globally [2]. He also highlights that unless there is involvement from Washington, there is expected to be strong demand for USD/JPY near the 155 level, citing factors such as high energy prices, cautious BOJ tightening, and a less accommodative Federal Reserve [2].
Market reactions include a weaker dollar across the board, attributed to the possible $30 billion of dollar sales, robust equity markets, and lower oil prices [2]. There is also mention of speculation that Tokyo may have intervened in crude oil futures markets, although this is not confirmed [2]. Turner projects that the DXY index should continue to find support near 98.00 and could move back toward 98.50 [2].
CONCLUSION
The Bank of Japan’s intervention, estimated at over $30 billion, has effectively capped the USD/JPY rally and triggered a broad weakening of the dollar. Market participants are now alert to the possibility of further interventions, especially during the ongoing holiday period. The outlook remains cautious, with key support levels in focus for both USD/JPY and the DXY index.