USD/JPY hovers near 155.00 amid growing intervention rumours
- The US Dollar remains steady, with long-term highs at 155.00 on sight.
- The pair has exceeded the levels that triggered BoJ's intervention in 2022 and 2024.
- Japanese Financial Minister Katayama has warned against "one-sided" rapid movements on the Yen.
The US Dollar remains trading within its previous ranges on Thursday, consolidating gains near 20-month highs at the 155.00 area against a weaker Japanese Yen. The pair has surpassed the levels that prompted the BoJ to step in last year, which has boosted rumours of an intervention.
On Wednesday, the Japanese Finance Minister Satsuki Katayama stressed the need for currencies to move in a stable manner, and warned about “one-sided” and rapid movements in the currency, a comment that has been seen as a verbal intervention.
PM Takaichi puts pressure on the BoJ
The Yen has been trading lower across the board over the last sessions, following news that Prime Minister Sanae Takaichi pressured the Bank of Japan (BoJ) to keep interest rates unchanged at the December meeting.
Takaichi affirmed that she “strongly hopes” the BoJ conducts its monetary policy to achieve its inflation target through rising wages, rather than through increasing food costs, underlining her preference for lower borrowing costs.
These comments have dampened hopes of a December rate hike by the Bank of Japan, adding bearish pressure on an already weak Japanese Yen.
In the US, President Trump signed the bill that ended the largest US government shutdown in history. Risk appetite undermined support for the safe-haven US Dollar, and the market is now awaiting details on the release of a significant backlog og US official data for a better assessment of the US economic outlook and the Federal Reserve’s monetary policy path.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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