Japanese authorities are suspected to have intervened in the foreign exchange markets after the USD/JPY currency pair fell sharply from near 160 to below 157, with session lows around 155.70 during the Asian session, before rebounding to the 156.80 area ahead of the European session opening on Monday [1][2]. Market participants estimate that the intervention involved operations of approximately JPY5-6 trillion (US$32-38 billion), with Reuters specifically reporting a figure of 5.48 trillion Yen (US$35 billion) spent by the Bank of Japan to support the Yen last week [1][2]. This scale of intervention is noted to be similar to previous actions in April 2024 and October 2022 [1].
The Japanese Ministry of Finance did not comment on the intervention, but the sudden, broad-based movement in Yen crosses and the absence of a clear fundamental trigger suggest official action [2]. Japanese Finance Minister Satsuki Katayama warned that Tokyo authorities were prepared to take decisive action against currency speculators after USD/JPY crossed the 160.00 level, which is considered a critical threshold for the Ministry of Finance [2].
MUFG’s Michael Wan states that the sustainability of a lower USD/JPY will depend on underlying fundamentals, including whether the Federal Reserve adopts a more dovish stance and, crucially, whether the Bank of Japan delivers on expected rate hikes [1]. MUFG’s base case anticipates two BoJ rate hikes in June and December 2024, projecting a gradual move in USD/JPY toward the 152 level, contingent on these policy actions and de-escalation in the Strait of Hormuz [1].
Market conditions were otherwise calm on Monday, with attention also focused on geopolitical developments in the Middle East. The Japanese economic calendar is empty due to Golden Week holidays, while US economic data and Federal Reserve commentary are expected to influence markets throughout the week [2].
CONCLUSION
Suspected large-scale intervention by Japanese authorities caused a sharp drop in USD/JPY, with estimates of up to JPY6 trillion deployed to support the Yen. The market's future direction will depend on central bank policy actions and geopolitical developments, with analysts expecting further BoJ rate hikes to reinforce Yen strength.