Japanese Yen Threads Intervention Levels

The Japanese yen traded around 159.9 per dollar on Thursday, staying close to the psychologically important 160 level that investors view as a potential trigger for another round of currency intervention by Japanese authorities, as renewed US-Iran tensions boosted demand for the dollar. The yen has now erased the gains recorded after Tokyo's ¥11.7 trillion intervention last month aimed at supporting the struggling currency. Its renewed weakness also drew fresh verbal warnings from officials, with Prime Minister Sane Takaichi stating that the government stands ready to respond to excessive exchange-rate movements when necessary. On the policy front, Bank of Japan Governor Kazuo Ueda said the central bank should weigh the costs and benefits of raising interest rates if inflation risks begin to outweigh downside risks to economic growth. Markets continue to expect another BOJ rate hike later this month.

The Japanese yen weakened toward the 160-per-dollar mark on Wednesday, approaching a level that previously triggered official intervention and prompting renewed warnings from Japanese authorities. Finance Minister Satsuki Katayama reiterated that the government remains prepared to take appropriate action in the foreign exchange market whenever necessary to address excessive currency movements. The yen’s latest decline comes despite Tokyo spending of ¥11.7 trillion on currency intervention measures between April 28 and May 27, underscoring the persistent pressure on the Japanese currency. The renewed weakness has also strengthened expectations that the Bank of Japan could deliver another interest-rate increase later this month as policymakers contend with inflationary pressures amplified by higher energy costs linked to tensions in the Middle East. Market participants are now focused on remarks from BOJ Governor Kazuo Ueda, who is scheduled to speak later on Wednesday.

The Japanese yen weakened beyond 159.5 per dollar on Tuesday, moving closer to the key 160 level that previously prompted official intervention to support the currency, drawing renewed verbal warnings from Tokyo. Finance Minister Satsuki Katayama said authorities stand ready to take appropriate action in currency markets when necessary, while noting increased volatility in oil and other financial markets. She also stated that ministry officials remain in close communication with their counterparts in Washington regarding foreign exchange developments. Data released on Friday showed that Japanese authorities spent ¥11.7 trillion on currency intervention in late April, confirming widespread market speculations. Meanwhile, investors are pricing in roughly a 78% probability that the Bank of Japan will raise interest rates again later this month as inflationary pressures linked to the Middle East conflict continue to intensify.