"Also Crossing 160 Yen" Japanese Yen Value Delayed for 6 Trading Days... Intervention Alert Rises

The value of the Japanese yen against the US dollar has declined for six consecutive trading days. As the prospect of reaching '1 dollar = 160 yen,' the lowest level in 34 years recorded last April, reemerges, concerns are growing that Japanese financial authorities may intervene in the market again.

[Image source=Reuters Yonhap News]

On the 20th (local time), in the New York foreign exchange market, the dollar-yen exchange rate rose (yen value fell) compared to the previous session, reaching 158.95 yen, the highest in nearly two months. This represents an additional overnight decline in the yen's value compared to the Tokyo foreign exchange market's closing rate of 158.2 yen per dollar. The yen's value against the dollar has been falling for six consecutive trading days.

This yen weakness is attributed to the structural interest rate differential between the US and Japan. In particular, the Bank of Japan (BOJ) did not finalize details regarding bond purchase reductions at this month's monetary policy meeting, confirming the market's yen selling trend.

Additionally, Neel Kashkari, president of the Minneapolis Federal Reserve Bank and a prominent hawk (favoring monetary tightening) within the US Federal Reserve (Fed), stated that achieving the 2% inflation target could take one to two years and that interest rate hikes cannot be ruled out. This further highlighted the US-Japan interest rate gap and pushed down the yen's value.

Shinichiro Kadota, a strategist at Barclays, said, "As long as the US-Japan interest rate differential exceeds a certain threshold, even if the gap narrows, yen selling due to carry trades may not decrease," forecasting that the dollar-yen exchange rate will reach the 160 yen level by the end of the year.

Accordingly, the market is closely watching whether Japanese financial authorities will intervene in the exchange rate. Previously, when the dollar-yen exchange rate surpassed 160 yen for the first time in 34 years at the end of April, the Japanese Ministry of Finance intervened in the market, and the exchange rate subsequently returned to the 151 yen level. The Ministry of Finance confirmed that the scale of foreign exchange market intervention from April to May reached 9.7885 trillion yen (approximately 86 trillion won).

Junya Tanase, a strategist at JP Morgan, stated, "The Ministry of Finance is prepared to intervene again if it judges that there are 'excessive,' 'speculative,' or 'fundamentally unjustified' movements," adding, "The speed of exchange rate movements and speculative yen selling will be key factors in deciding intervention." Major foreign media outlets reported that since the Fed reduced its year-end rate cut forecast to one through the dot plot, the structural factor of the interest rate gap causing yen weakness is unlikely to be resolved.

Meanwhile, Japan was once again included in the US Treasury's currency watchlist after one year. Japan met two criteria among the evaluation standards: a current account surplus exceeding 3% of GDP and a trade surplus with the US. The foreign exchange interventions in April and May do not fall within the scope of this evaluation in terms of timing and scale.

This content was produced with the assistance of AI translation services.