Japanese Yen holds steady on intervention fears

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The USD/JPY pair trades on a flat note near 156.40 during the early European session on Thursday. The Japanese Yen (JPY) remains in focus after rallying on Wednesday amid suspected speculation that officials are intervening in the market.

USD/JPY flat lines around 156.40 in Thursday’s early European session.
Traders remain on edge over the potential for Japanese officials to step back into the market to curb weakness.
The highly-anticipated US April NFP data will be in the spotlight on Friday.

Japan’s top foreign exchange official Atsushi Mimura said on Thursday that authorities are prepared to respond on all fronts to speculative moves in the foreign exchange market. Mimura also declined to comment on FX intervention and specific currency levels.

Last week, Japanese Finance Minister Satsuki Katayama said Japan can take action against speculative foreign exchange movements. Intervention fears from Japanese authorities could underpin the JPY and act as a headwind for the pair in the near term.

Bank of Japan (BoJ) minutes of its March meeting showed on Thursday that many board members saw the need to raise ‌interest rates if the Iran war-driven energy shock is prolonged and gives rise to concerns over second-round effects on broader inflation.

The minutes highlighted the BoJ's hawkish bias that may reinforce market expectations of a rate hike as soon as June, as rising oil costs from the conflict add to already building inflationary pressure.

The US Initial Jobless Claims report is due later on Thursday. The attention will shift to the US jobs data for April later on Friday. Economists expect a gain of 60,000 jobs for April, while the Unemployment Rate is projected to remain steady at 4.3%. Any signs of improvement in the US labor market could boost the Greenback against the JPY.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.