Quick overview

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The potential for the yen’s intervention-driven surge to swiftly fade raises the possibility that Japan will need to intervene again in the market to support the exchange rate. The currency began to decline on Friday morning in Tokyo after rising 3% against the dollar on Thursday as Japan purchased yen and sold dollars.

Authorities have entered the market, according to a person familiar with the situation, although the country’s top currency official has declined to confirm intervention. Another person with knowledge of the situation claims that US economic officials were informed in advance of the action.

The pattern observed around this time in 2024, when Japan entered the market multiple times to address weakness, would be followed by an erosion of early gains in the yen. Before Japan’s May 4–6 Golden Week holiday, Atsushi Mimura, the vice finance minister for international affairs, gave traders a subtle warning about this on Friday.

“We are just at the start of a long holiday period, but I will not comment on future developments,” Mimura stated. “I think we share our assessments of the situation and our actions, and we have very close contact with the United States. “Generally speaking, we are always ready to act regarding crude oil futures transactions,” Mimura said, extending his caution to energy traders.

, Japanese authorities spent a total of about $100 billion purchasing the currency multiple times after the yen fell to about 160 points in 2024.

On days when the yen hit 157.99, 161.76, and 159.45, further actions were taken. The intervention on Thursday did not come after a sudden spike in weakness, despite officials’ repeated claims that they are focusing on excessive volatility rather than particular levels.

However, the yen appears destined for more declines as the Federal Reserve appears less dovish and the Bank of Japan appears hesitant to commit to a June rate hike. The most recent action taken by the Japanese government indicated unease about the country’s protracted weakness, which could lead to higher import prices and inflation.