Ministry of Finance in Japan will continue to maintain USDJPY at the needed level through interventions

Japan may have to take action against disorderly, speculative currency movements, Japan's Vice Finance Minister for International Affairs Masato Kanda said on Tuesday, confirming Tokyo's willingness to intervene again to support a weak yen. He added that it would be preferable to keep exchange rates in line with fundamentals.

“When there are excessive fluctuations or disorderly movements due to speculation, the market is not functioning and the government may have to take appropriate action. We will continue to take the same firm approach as we have in the past.”

Tokyo is suggested to intervene for at least two days last week to weaken USDJPY after its fall to the lows, which were last recorded more than three decades ago.

According to the Bank of Japan, the government spent more than 9 trillion yen ($58.4 billion) to protect the currency, which helped boost the yen from a 34-year low of 160.245 per dollar to a roughly one-month high of 151.86 during the week.

Tokyo is estimated to spend around $60 billion during its previous interventions to support the yen in September-October 2022.

Japan remains reluctant to intervene in the currency market, given its limited dollar reserves and comments from US Treasury Secretary Janet Yellen that such moves are acceptable only in rare circumstances.

A weaker yen is beneficial for Japanese exporters but quite a headache for importers as it increases import costs, intensifies inflation and squeezes households' options.

The yen is under pressure even after the Bank of Japan’s landmark decision to exit negative interest rates.

The dynamics prior to this decision led to the cash withdrawal from the yen into higher-yielding assets.

Kanda may have started warning markets beforehand as he wants to keep the exchange rate tied to a lower level of 150 yen against the dollar.

Based on the previous movements of the USDJPY pair, it can be concluded that the level of 157.5 is the point at which the probability of interventions increases significantly.

The overall recommendation is to sell USDJPY if the quotes rise to the 157.5 level.

Profits should be taken at the level of 155.0. A Stop-loss could be set at the level of 160.5.

The possible loss should not exceed 2% of your deposit funds.