Yen exchange rate one step closer to intervention point; Governor Ueda’s press conference suggests a return in September 2022 – Bloomberg

Yen traders are bracing for a repeat on September 22, 2022.The yen plunged following the Bank of Japan’s decision to reaffirm its accommodative monetary policy, and the Ministry of Finance decided to intervene to buy the yen. It’s day.

Based on past statements by Finance Minister Masato Kanda, 157.60 yen to the dollar is one of the key levels to watch. With the yen already depreciating much further than it was in 2022, and US interest rates showing no signs of coming down anytime soon, Bank of Japan Governor Kazuo Ueda made hawkish remarks at a press conference after the monetary policy meeting on the 26th. Just by not doing so, the circle may move toward its inflection point.

The yen has continued to fall, and on the 24th it exceeded the psychological milestone of 155 yen for the first time in 34 years, but so far there is no sign that the Ministry of Finance will buy the yen. However, there are many factors that could trigger a sharp yen depreciation, and if the monetary authorities take action, the situation could change completely.

The Bank of Japan is expected to announce its policy statement and outlook for economic and price trends (outlook report) in the afternoon of the 26th, and Governor Ueda will hold a press conference in the afternoon. Furthermore, next week, Monday (29th) and Friday (May 3rd) are national holidays in Japan, and there is a risk that the market will fluctuate wildly amid thin trading.

Finance Minister Kanda said last month that the yen’s depreciation of more than 4% in two weeks was not in line with fundamentals. “It’s clearly speculation.” Based on data compiled by Bloomberg, this threshold will be reached when the yen depreciates to 157.60 yen. As of 1:30 pm on the 25th, the yen exchange rate was trading at around 155.47 yen.

[Viewpoint]“Kanda Line” suggests that volatility is not enough for yen intervention

Tsutomu Soma, a bond and currency trader at Monex Securities, points out that if the yen depreciates by 1 to 2 yen in the wake of the Bank of Japan meeting, there is a good chance that the authorities will intervene. “However, it is difficult to do so if we are just moving slowly amidst the current sense of caution,” he said, adding that there are many people who are waiting to sell the yen when it rises due to intervention.

According to Yujiro Goto, chief foreign exchange strategist at Nomura Securities, there is a risk that what the Bank of Japan will announce after the meeting on the 26th will cause disappointment in the market, so the monetary authority will intervene to buy the yen before the meeting ends. However, the effect will be diminished. A Bloomberg survey found that almost all Bank of Japan watchers expect monetary policy to remain unchanged.

Finance Minister Shunichi Suzuki told the House of Councilors Finance and Financial Affairs Committee on the 25th, “There is no change in our intention to take appropriate measures” regarding the yen’s depreciation.

Last week, the finance ministers of Japan, the United States, and South Korea issued a joint statement acknowledging Japan and South Korea’s serious concerns about the recent rapid depreciation of their currencies, and vowing to continue to closely consult on developments in the foreign exchange market. The yen has fallen more than 9% this year and remains the worst performer among the 10 major currencies even after the Bank of Japan raised interest rates in March for the first time since 2007.

Regarding foreign exchange intervention, Shin Noji, chief foreign exchange and foreign debt strategist at SMBC Nikko Securities, said, “Given the fact that the 155 yen rate was ignored, it is expected that the hawkish side will not be able to overcome the pressure to depreciate the yen after the Bank of Japan decision meeting on the 26th. It is natural to think that it is being preserved as much as possible.”