Last week’s breakout in the USDJPY has broken above resistance and risks hitting another BOJ intervention push.
USDJPY: Weekly Chart
USDJPY pushed to the previous week’s high at 146.37, and the big resistance is near 151.94.
Japan intervened in the foreign exchange market in September 2022 for the first time since 1998 in an attempt to defend the yen. The US was raising rates aggressively, while the Bank of Japan stuck with ultra-low interest rates. Analysts believe the BOJ will only start downscaling its massive monetary easing in a year’s time. A Reuters poll found only one of 22 economists, or 5%, expected the BOJ to start unwinding its ultra-easy policy this year.
But a former official said the bank will only intervene again at $150. “Authorities usually don’t have a specific line in the sand in mind. But key thresholds like 150 are important for political reasons, as they are easy to understand,” said Atsushi Takeuchi, head of the BOJ’s fx department, during interventions in 2010–2012.
The public mood is key for when authorities intervene, but anxiety over the weak yen appeared less than a year ago as households became accustomed to rising prices, he said. The reopening of the country’s borders is also boosting the economy via increased tourist spending.
“When to intervene has always been an extremely political decision in Japan. Nowadays, it’s the prime minister that ultimately makes the call,” Takeuchi told Reuters.
“Public discontent over the weak yen isn’t escalating to a scale seen last year,” he said. “I don’t think Kishida is under huge pressure to respond.
That could change if the market pushes into the 145 levels, and traders should be careful going long the US dollar in that environment.
Friday’s Jackson Hole comments from Fed Chair Jerome Powell said the Federal Reserve was not done with its rate hikes.
“Although inflation has moved down from its peak—a welcome development—it remains too high,” Powell said.
“We are prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down towards our objective,” he added.
