Picking a bottom on the Japanese Yen (JPY) remains hard. Speculation that Prime Minister Sanae Takaichi will dissolve the parliament and call snap elections has continued to rise over the weekend, ING's FX analyst Francesco Pesole notes.

BoJ intervention seen likely only at higher levels

"In theory, such a move would be aimed at securing a stronger majority, which, if achieved, is often appreciated by the domestic currency. But for now, political uncertainty fueled more speculative USD/JPY buying on Friday, with the Finance Minister's tolerance band continuing to be tested. Interestingly, the yen is the only currency in G10 not gaining from the Fed’s news."

"Based on Japan’s latest FX interventions in July 2024, we still suspect there may be a preference to wait for a USD-negative market event (previously a cool US CPI report) to intervene. The spot also traded at almost 162 when intervention started, around 2.5% above the current 157.9."

"If Fed risk abates, USD/JPY continues to face upside risks that could extend to 160 – a level that should see some resistance as some identify it as the line in the sand for the Bank of Japan."