Atsushi Mimura, Japan’s Vice Finance Minister for International Affairs, has raised alarms about fast and one-sided foreign exchange movements. He stated that appropriate actions would be taken to manage these extreme market behaviors. The USD/JPY exchange rate was about 157.65, reflecting a slight decrease of 0.08% for the day. The value of the Japanese Yen is influenced by various factors, including the performance of Japan’s economy and the policies of the Bank of Japan (BoJ).

The Role Of The Bank Of Japan

The BoJ is crucial in controlling currency movements and influences the Yen by intervening in market changes, but it does so cautiously due to political factors. Since 2013, the BoJ’s very loose monetary policy has caused the Yen to lose value, although recent policy changes have offered some support. The growing difference between the policies of the BoJ and the US Federal Reserve has made the US Dollar more attractive due to higher yields. As the BoJ starts to move away from its ultra-loose policy and other central banks cut interest rates, this gap is starting to close. During times of market uncertainty, the Yen is perceived as a safe investment, which may enhance its value against riskier currencies. With the USD/JPY rate near 157.65, we take the warnings from Japanese officials seriously. These are strong signals indicating that “one-sided, rapid moves” could trigger intervention. This hints that the Ministry of Finance may act directly in the currency markets.

Potential For Market Intervention

There is now a higher risk of a sudden drop in USD/JPY than just a few weeks ago. The one-month implied volatility for USD/JPY options has risen above 11%, indicating market concern about possible intervention. In December 2025, the pair tested the 158.00 level several times, a point that has caught official attention. Looking back at 2022 and 2024, interventions followed similar warnings when the pair surpassed key psychological levels above 155. This history suggests that when officials use such specific language, they may be preparing to buy Yen. Thus, this should not be seen as mere talk. The primary reason for the Yen’s weakness remains the large interest rate difference between the US and Japan. While the Bank of Japan has gradually increased its policy rate to 0.25% this year, the US Federal Reserve’s rate sits at 4.75%, making the dollar more appealing. This ongoing trend complicates timing for a Yen strengthening move. In the upcoming weeks, consider hedging long USD/JPY positions. Purchasing put options can protect against a sudden drop due to intervention, while still allowing for potential gains if the pair rises. Another strategy is to sell covered call options with strike prices above 160, but this involves risk given the high volatility. Create your live VT Markets account and start trading now.

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