Japanese Yen extends losses, trading at previous intervention levels
- USD/JPY rallies to 160.30, boosting Japanese authorities' intervention risks.
- Strong US data and higher Oil prices are hurting the Yen on Monday.
- Japanese GDP has been revised lower, but BoJ tightening bets remain unchanged.
The Japanese Yen (JPY) extends losses against the US Dollar (USD) on Monday, with the USD/JPY pair trading at 160.30 at the time of writing. The JPY has given away all the ground taken after an alleged intervention on April 30, and it has breached the key 160.00 level, considered the limit of Yen weakness for Japanese authorities.
Japanese Finance Minister Satsuki Takayama affirmed before the parliament on Friday that the government reserves the right to take decisive action against excessively volatile currency moves. These comments resemble those before April 30, when the USD/JPY dropped about 400 pips with no fundamental reason behind it. Japanese Government data revealed that Japan’s foreign reserves fell in May by the largest amount since records began in 2000, which highlights Japan’s enormous effort to support the JPY.
Strong US data and geopolitical tensions boost the USD
A combination of US Dollar strength, following a bright US Nonfarm Payrolls report on Friday, and higher Oil prices, as tensions between Israel and Iran flare up, is buoying the US Dollar across the board on Monday, and adding negative pressure on the Japanese currency.
On Friday, data from the US Labor Department showed a 172K increase in payrolls in May, more than twice the 85K rise forecasted by market analysts. Beyond that, April’s figures were revised upward to a 179K gain in net jobs, from previous estimates of 115K. These data confirm that the US labour market is tightening in 2026, which has boosted expectations that the Federal Reserve will tighten its monetary policy later this year.
On the geopolitical front, Israel and Iran have exchanged attacks, despite calls for restraint by US President Donald Trump. Oil prices have jumped about $4 from Friday’s lows, with Brent Crude trading around $96.40, adding pressure to Japan’s economic outlook.
Earlier on the day, Japan’s Cabinet Office revised the first quarter’s Annualised Gross Domestic Product to a 1.8% growth from previous estimations of a 2.1% rise, still above the previous quarter’s 1.3% growth. The quarterly performance has been left unrevised, at a 0.5% growth. These figures do not alter the view that the Bank of Japan will hike interest rates at next week’s monetary policy meeting.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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