USD/JPY: Intervention risks grow as yen falls to 11-month low

• 30-year Treasury yield rose 12bps to 4.645% vs 15.19% which was the peak at 1981.
• Bloomberg dollar index has best rally in three weeks, which is also highest level since December
• BOJ Governor Ueda stands on dovish ground, yen free to fall; PM Kishida delivers plan to ease inflation pain

Bank of Japan Governor Kazuo Ueda and his deputy governor Uchida are committed to their ultra-easy policy.  Governor Ueda noted that there was “very high uncertainty” over whether companies would continue to increase prices and wages.  Uchida stated that the central bank needs to patiently continue monetary easing.  He also reiterated that they are closely watching FX markets.

Japan’s Prime Minister Kishida also unveiled new economic measures that should help deliver sustainable wage growth.  Kishida expressed his unhappiness with the yen, noting that excessive currency moves are not desirable and that he wants to monitor markets with vigilance.

The pressure to stop the yen’s slide is building and the current move in Treasuries makes dollar strength likely to remain intact.

USD/JPY Daily Chart

As of late March, the US dollar continues to assert renewed strength as a a result, USD/JPY has retested prior levels that  triggered intervention last year.  The path to 150 seems like it should be there given the major reset Wall Street is having with pricing in higher-for-longer.

Everyone wants to know when does Japan step in and support the yen, or can they just ditch their easy policy?  Excessively overbought territory could last a while longer, but it seems  150 to 155 will remain key levels.

Next months inflation report should include some upward revisions, which should mean traders might become more optimistic about a policy shift or the abandoning of yield curve control.  Yen weakness might last a little while longer, but FX traders are anxious for when Japan is ready to make a meaningful policy change.

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