Japanese Ministry of Finance intervention risk is rising

25 April 2024 62
Japanese Ministry of Finance intervention risk is rising

Despite the statements about intervention, there has been no sign yet of yen purchases by the ministry, even as the currency continues its slide and on Wednesday USDJPY broke beyond the level of 155 for the first time in more than three decades.

 

But the situation could change very quickly, with a host of potential triggers for a sharp drop in the yen and action from authorities in Tokyo.

 

Traders will be on high alert when the BOJ releases its policy statement and forecasts around midday Friday, and when Ueda holds a press conference in the afternoon.

 

There is a risk that the BOJ will deliver a policy announcement that disappoints the market, which reduces the effectiveness of intervening. Almost all BOJ watchers surveyed by Bloomberg forecast interest rate settings to be kept unchanged.

 

Public sentiment toward a weak yen has also worsened with the latest increase in the USDJPY rate accompanying a decline in Japanese equities. There’s also been a series of comments from business leaders over the past two weeks, making it politically costly to allow the currency to fall further.

Small and mid-sized Japanese companies are suffering from the rising costs of imported materials. The sliding yen has spurred cost-push inflation through rising import costs, weighing on consumption. Household spending fell in February for a 12th straight month.

 

According to the analysis of comments made by Masato Kanda, top currency official at the Japanese Ministry of Finance, the level of 157.60 against the dollar is one of the key levels.

 

From the technical point of view, the USDJPY pair is forming local highs, while oscillators, in particular RSI, are no longer forming them.

 

The final recommendation is to sell USDJPT when the pair reaches 157.60.

The profit could be fixed at the level of 153.30.

The Stop-loss could be fixed at 158.00.

It’s suggested to limit the trading volume to no more than 2% of your deposit funds.

This content is for informational purposes only and is not intended to be investing advice.

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