MUFG’s Senior Currency Analyst Lee Hardman notes that the Japanese Yen has rebounded, pulling USD/JPY back below 160.00 after verbal warnings from Japan’s currency authorities. Comments from officials and hawkish Bank of Japan minutes suggest policymakers are increasingly focused on inflation from higher energy prices and Yen weakness, keeping expectations alive for another BoJ rate hike and potential FX or Oil market intervention to support the Yen.

Yen support from policy and intervention talk

"The yen has strengthened overnight resulting in USD/JPY dropping back below the 160.00-level after hitting a high of 160.46."

"The main trigger for the yen rebound was comments from Japan’s currency chief Atsushi Mimura who warned that bold action may be needed if the situation continues when referring to yen weakness."

"He finished by indicating that they are prepared to respond on all fronts, and our focus is broad and comprehensive."

"At the current juncture, the BoJ appears to be placing more weight on the inflationary impact from higher energy prices and the weaker yen than the negative impact on growth keeping it on course to hike rates again as soon as next month."

"Overall, the developments highlight that Japanese policymakers appear increasingly prepared to intervene and/or tighten monetary policy to help support the yen."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)