From Nikkei Asia, March 30:
Key question is whether the yen’s slide is being driven by speculation
The yen's jittery trade around the 160 level against the dollar on Monday -- after briefly touching the key psychological threshold for the first time in 20 months -- highlights the market's central concern: the risk of currency market intervention by Japanese authorities.
The authorities were ready to take "decisive" action against speculative moves, warned Atsushi Mimura, Japan's vice finance minister for international affairs, on Monday. The warning followed the threat of "bold actions" by Finance Minister Satsuki Katayama on Friday.
The yen's brush with the threshold came amid soaring oil prices driven by the conflict in the Middle East, as investors rushed into the safe-haven greenback. The resulting currency-market uncertainty and the war's economic fallout are complicating policy management for the Bank of Japan as it seeks to navigate an exit from ultra-low interest rates.
Is an intervention possible? Here are five things to keep in mind:
What is currency market intervention?
Market players were reminded of the risk of intervention in January when the U.S. Federal Reserve conducted "a rate check" on behalf of the U.S. Treasury, a move that is considered to be a preliminary step to a possible currency intervention. A rate check literally means currency authorities making calls to ask about the currency rates, but the action implies that the authorities are ready to place orders.
In Japan, the finance ministry is in charge of the currency market, using the BOJ as its agent when it needs to place orders for interventions.
There are two types of intervention -- selling dollars for yen to support a weakened yen, or selling yen for dollars to correct an excessive yen strength.
The source of such operations is the Foreign Exchange Fund Special Account, which the ministry oversees to manage the nation's foreign currency-denominated assets.
According to a 2025 U.S.-Japan joint statement by top finance officials, the criteria for foreign-exchange intervention "should be reserved for combatting excess volatility and disorderly movements in exchange rates."
The last time Japan intervened in the forex market was in July 2024. On the back of a wide U.S.-Japan interest rate gap, the yen fell to the 161.90 range, touching its weakest level in roughly 37 years, prompting authorities to step in and prop up the yen.
Will Japan intervene?
Experts are divided over the likelihood of intervention, with views split on whether or not the yen's weakness is being driven by speculation.
Analysts at Citi Research believe that while there remains room for intervention, the probability is lower now. "We have revised down our subjective probability from around 75% before the Iran conflict started to about 60%," as recent movements suggest that the yen's fall comes not from its principal weakness but "derived more from USD strength."
Masahiko Loo, senior fixed income strategist at State Street Investment Management, sees FX intervention risks rising if the yen "decisively breaks above 162." But he noted that finance ministry action alone "is unlikely to do the heavy lifting -- making April BOJ hike increasingly necessary to stem further yen weakness."
Some market participants went further and speculated about the possibility of intervention in crude oil futures markets after officials, including Finance Minister Katayama, blamed speculative trading in oil for the yen's weakness.
Unlike currency intervention, "there is no past experience of currency authorities intervening in commodity markets," Citi analysts said. "There are considerable uncertainties and it would not be desirable from the perspective of free market principals."
How far will the yen fall?....
....MUCH MORE
Six months of USDJPY via TradingView. Higher is weaker yen i.e. more yen to buy a buck:
