USD/JPY began a fall earlier today after Japan’s FX chief Atsushi Mimura warned authorities are ready to take “decisive” action if speculative moves persist. It was the strongest intervention signal yet and led to a quick drop from 160.40 to below the big figure.
That decline has continued and Finance Minister Satsuki Katayama is now piling on, saying that Japan is watching market moves with a “high sense of urgency”. Katayama has used the ‘decisive’ comment recently but Mimura is seen as the final line of rhetoric before intervention.
I warned on Friday about the potential for intervention or tough talk as the pair was flirting with some major levels.
Now we’re getting a significant reversal but it’s still dwarfed by the January 23 ‘rate check move where the pair dove from 159.22 down to 155.71 and then continued to 153.30 in the subsequent two days.
But with an energy crisis brewing, Japan is in a tough spot. They have huge reserves of oil but higher energy costs will ultimately sap its current account and drive up borrowing costs. It’s naturally one of the most hard-hit major economies in a global energy crisis because it imports virtually all its energy.
Last year, Japan embarked on a restart of its nuclear power facilities but that’s a long-term aid, not a short-term solution. Japan will also have a difficult time negotiating directly with Tehran for passage of its ships through Hormuz.
USD/JPY was last down 94 pips to 159.37.
Zooming out to a weekly chart, the importance of 160.00 is clear. That’s capped the pair since 2024 when there was a major intervention and top. There is a reluctance for speculators to push it through but at some point the fundamentals take over.
This article was written by Adam Button at investinglive.com.
