Japan finance minister Katayama is out with another warning to markets today, reaffirming that Tokyo remains ready to step in if necessary to defend the yen. Her comments:
Government stands ready to take decisive action in the FX market
Always watching market moves with a high sense of urgency, including at this very moment
Must ensure yen movements reflect economic fundamentals
Hopes to maintain market trust in the yen and the Takaichi administration’s fiscal policy through transparent, consistent communication
Her remarks are not anything that we haven’t heard of before. But as always, it is best for traders to take note on the tone and frequency of the communication.
The comments above certainly underscore a more firm language, particularly the reference to taking “decisive action”. Then again, it is a phrase that Tokyo officials have used in the past in associating with the threat of direct currency intervention.
Having said that, I wouldn’t read too much into the remarks as suggesting that intervention is imminent. As mentioned above, Katayama has used similarly forceful language before.
So if anything else, this feels like Tokyo attempting to keep the pressure on yen sellers rather than signalling an immediate move.
For now, USD/JPY is seeing a modest rebound after the sharp drop on Thursday last week. The pair is trading back above the 157 mark and is starting to take another look at key resistance in the form of the 200-day moving average at around 158.51. The psychologically important 160 level is still a little far away but it isn’t completely out of the picture yet. So, that should continue to keep intervention risks on the radar – especially if we start seeing another rapid and one-sided depreciation in the yen.
At least for the time being, I reckon Tokyo is still hoping that verbal intervention will do enough to keep speculative pressures in check. With the BOJ decision coming up later this week, policymakers would also surely prefer to see how markets react to that before considering more direct action.
This article was written by Justin Low at investinglive.com.
