The Japanese yen strengthened significantly on Wednesday, reaching its highest level in over two months and fueling speculation that Japanese authorities may have intervened in the currency market again, following their actions on April 30 to support the currency.
During Asian trading hours, the yen appreciated by as much as 1.8%, reaching 155.04 yen per U.S. dollar, its strongest level since February 24.
This move follows Japan's first foreign exchange market intervention of 2024, which occurred in late April and prompted an intraday surge of up to 3% for the yen. While Japanese officials have declined to comment directly on whether intervention took place, informed sources confirmed the action, and analysis of Bank of Japan accounts suggested the scale of the intervention was approximately $34.5 billion.
"The decline in the USD/JPY exchange rate exhibits all the characteristics of an intervention," said Rodrigo Catril, a strategist at National Australia Bank. "Recent price movements further reinforce the view that Japan's Ministry of Finance is focused on preventing the yen from approaching the 160 level, while also attempting to curb speculative trading in the currency."
The Ministry of Finance did not immediately respond to requests for comment during a public holiday when markets were closed.
The yen's rise on Wednesday coincided with broad-based weakness in the U.S. dollar, as market demand for safe-haven assets diminished after U.S. President Donald Trump hinted at progress toward a final agreement with Iran. Although Japanese markets were closed for a holiday, TJM Europe noted that the sharp appreciation of the yen carried indications of further intervention by authorities.
"I believe this is the Ministry of Finance, via the Bank of Japan, conducting further sales of U.S. dollars against the yen," said Neil Jones, Managing Director of Foreign Exchange Sales and Trading. "If the Ministry of Finance wants to send a clear signal, it needs to push the USD/JPY rate below 155, and even below 153.50, perhaps targeting a level of 150."
Analysts at Goldman Sachs Group indicated that, based on the scale of last week's intervention, Japan has the capacity to intervene approximately 30 more times. However, they expect officials to conserve reserves and intervene at more effective moments.
In 2024, after the yen weakened to around 160.17, Japanese authorities intervened on multiple occasions to support the currency, with total intervention estimated at approximately $100 billion. Additional measures were taken when the yen reached levels of 157.99, 161.76, and 159.45.
Japan's Finance Minister, Shunichi Suzuki, stated on Monday that speculative trading in the currency market has been present for some time.
A Japanese finance ministry official previously noted that, according to International Monetary Fund guidelines, Japan could only conduct a maximum of two more rounds of foreign exchange intervention—each lasting three days—before the end of November if it wishes to maintain its status as a free-floating exchange rate regime.
Reports regarding the IMF guidelines "have bolstered investor confidence to push the USD/JPY higher again," said David Forrester, a senior strategist at Credit Agricole based in Singapore. "This gives the Ministry of Finance and the Bank of Japan another opportunity to intervene to defend the yen around 157, which appears to remain the new line in the sand."
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