Sep 29, 2023

USDJPY trades only a short move from the 150 level where the BOJ intervened in the market in 2022.

USDJPY Weekly Chart

USDJPY: Weekly Chart

The sharp rise in the USDJPY angered BOJ officials in 2022, and a bout of yen buying happened to mark a top in the pair.

The yen hit an 11-month high against the US dollar, just below the 33-year high of 151.95 posted last October. According to a former top Japanese currency official, Eisuke Sakakibara, the government may step into foreign exchange markets if the yen breaches 150 against the dollar, adding that officials could get concerned if it reaches 155.

Sakakibara, also known as “Mr. Yen,” oversaw more than ten currency interventions during his role as Japan’s vice finance minister for international affairs between 1997 and 1999. Sakakibara believes the Japanese government will try to accept yen weakness without action as it waits for a change in the policy of the Federal Reserve.

The yen has weakened as the US dollar rose with rising Treasury yields, but the Fed shows no sign of slowing down, and rates hit 2007 highs this week.

The Japanese government spent $60 billion last year on three interventions to prop up the yen when it rose to 146 per dollar and then again near 152. Sakakibara said the government may have to spend a similar amount this time. He also said the yen could fall to 160 with government intervention.

The Japanese government has enough to manage substantial intervention, with $1.25 trillion in foreign currency reserves, more than it had when it intervened in the currency market in 1998.

Sakakibara said he expects the yen to strengthen after the Federal Reserve’s meeting in December, with a rise in interest rates in Japan also possible next year. He said, “There’s quite a big possibility that US monetary policy may change in the near future. So, if that happens, the yen will start to strengthen towards 130 per dollar.”

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