Japan’s Ministry of Finance look to be back in the market once more, with the ‘silent hand’ of intervention being the obvious culprit behind today’s 3 big figure slide in USD/JPY, coming hot on the heels of the initial intervention round which took place last week.

Once again, and in keeping with their usual modus operandi, the MoF have made no public comment regarding this latest move, and we’ll have to wait until the BoJ accounts are published tomorrow to obtain certainty on this front. Still, if it walks like a duck, and quacks like a duck, then it probably is a duck, and they’ve probably got their hands dirty once more.

Doing so, incidentally, would also be very much in keeping with how these efforts have worked out in the past. In both 2022, and 2024, the MoF ‘double tapped’ the market – stepping in once to prop up the JPY, letting markets calm a touch, and then stepping in once more a few days later. That appears to be what has happened once again this time out.

As for the broader context around this latest move, the timing again suggests that the focus remains on defending a specific level, namely the 160 figure in spot USD/JPY, as opposed to responding to heightened volatility, as we’ve seen in the past, reinforcing the idea that the playbook has changed under the Takaichi/Katayama administration.

Regardless, one must recall that intervention in and of itself is unable to change the longer-run trend in the JPY. That is, unless the MoF want to spend $30bln a week forever more in propping up the JPY, which is quite obviously unsustainable. As a result, while this does clearly tilt the risk-reward further out of the favour of JPY shorts in the immediate-term, considering the risk that one could get caught a few big figures offside in short order if the MoF step in again, the longer-run trend of JPY softness remains intact. Changing that trend would require either a tighter fiscal approach, which seems unlikely, or more rapid BoJ policy normalisation, which also seems relatively unlikely for the time being.

A few other considerations are worth bearing in mind amid all this:

1. Chatter regarding potential US involvement in interventions seems wide of the mark for the time being, despite the Treasury/NY Fed having been involved in rate checks at the end of January. For the time being, the MoF are doing an able job of propping things up on their own, with US involvement limited simply to implicitly agreeing with Japan’s actions, per recent comments from Bessent & Co. That seems unlikely to change for the time being
2. Although some have looked to IMF guidelines recently, suggesting that the MoF may only be able to intervene on two further occasions this year lest losing the label of having a ‘free-floating’ currency, this also seems somewhat wide of the mark, considering that the MoF are likely not only to do as they see fit in terms of supporting the currency, but also that they have the US’s blessing to do so
3. Similar goes for speculation that the MoF would burn through their reserves. A rough, ‘back of the envelope’ calculation suggests that the Japanese would be able to carry out over 30 interventions of the size (approx. $35bln) that we saw last week, before having to start worrying about running out of funds. Put simply, this is in no way a constraint on any further market operations that may take place in the future