Rabobank’s Senior FX Strategist Jane Foley highlights that the Japanese Yen (JPY) is expected to receive near-term support from an anticipated endorsement by the US Treasury of the Ministry of Finance’s (MoF) recent foreign exchange (FX) intervention efforts [1]. The visit of US Treasury Secretary Bessent to Japan this week is widely expected to result in such an endorsement, which would likely keep the JPY underpinned in the short term [1]. Foley notes that confirmation of US Treasury support for the MoF’s actions would reinforce this effect [1].
However, Foley emphasizes that for USD/JPY to convincingly move lower, markets will require stronger Japanese fundamentals and continued monetary tightening from the Bank of Japan (BoJ), in addition to a dovish outlook from the US Federal Reserve (Fed) [1]. The market currently sees a strong chance that the BoJ will hike rates again in June, especially after three policy makers dissented in favor of higher rates at the April policy meeting [1].
Reuters has reported that the MoF spent a relatively moderate JPY 10 trillion in its recent intervention activity, which may concern JPY bears by suggesting the government retains further capacity for intervention [1]. Nonetheless, Foley warns that if expectations for further BoJ rate hikes begin to waver, the JPY could become vulnerable again [1]. Rabobank’s forecast projects a move to USD/JPY 152 over a six-month horizon, contingent on the continuation of the BoJ’s rate hiking cycle and a dovish Fed [1].
CONCLUSION
The Japanese Yen is expected to remain supported in the near term by anticipated US Treasury endorsement of recent MoF FX interventions and the prospect of further BoJ rate hikes. However, sustained Yen strength will depend on ongoing policy tightening and improved Japanese fundamentals, with Rabobank forecasting USD/JPY at 152 in six months if these conditions are met.