USD/JPY continues to climb in a low-volatility, risk-on environment, briefly breaching 155.0. Japan’s Ministry of Finance has issued cautionary signals, hinting at potential intervention, though strategists suggest verbal warnings may persist until US data resumes, leaving the pair poised to test 156-157 in the coming weeks, ING's FX analyst Francesco Pesole notes.

Japan signals FX vigilance amid USD strength

"Japanese officials probably hope we are right, as USD/JPY continues to creep higher in the low-volatility, risk-on environment. The pair briefly breached 155.0 yesterday, as Japan’s Ministry of Finance continues to send warning signs. We definitely are entering FX intervention territory, but even if intervening is the plan, there is an argument for the MoF to wait until US data releases resume."

"Remember, in July of last year, the MoF surprisingly intervened after a sharp slowdown in US inflation, seemingly shifting strategy: intervening in a USD/JPY market-induced selloff, rather than in a rally. If our intuition is right, and the MoF sticks to mere verbal intervention for now, markets may keep testing the upside tolerance band at 156-157 in the next couple of weeks."