The Intervention Level

In March, Masato Kanda, Vice-Minister of Finance for International Affairs said the Yen had weakened beyond what market fundamentals warranted. He added that the Japanese Authorities would be ready to intervene if the Yen depreciated any further. From past experience of intervention, any level above 150.000 is considered a target for intervention. 

“I think 152 is a critical level at this point where we will expect intervention in a scenario where they do expect the Fed to start cutting this year. But if the market prices no cuts by the Fed this year they will realize the level is higher..” Said the Global Head of G-10 FX.”

Even if the authorities intervene, however, they won’t have the power to plug the levee forever, and it will eventually break, pushing USD/JPY higher.  

“It will be more like leaning against the wind. They know very well, also from the past, that these interventions don’t work, it is mainly a threat, so they can create some caution in the market, some two-way risk. 

“They know very well everything depends on the Fed. If they just buy some time with intervention until the Fed starts to cut rates it will be fine, but if the Fed does not cut this year then there is nothing these interventions can do.” Said Vamvakidis.