• Tokyo sends warning over yen’s deprecation
• Yen has slumped over 7% against US dollar since April

USD/JPY is in positive territory on Monday. In the European session, the yen is trading at 143.15, down 0.36%.

Tokyo issues warning over slumping yen

The Japanese yen continues to lose ground and the Japanese government is not amused. The yen slipped 1.26% last week and fell as low as 143.87 on Friday, its lowest level since November 7th. Since the start of April, the yen has plunged over 7% against the dollar.

On Monday, Japan’s top currency diplomat, Masota Kanda warned that the yen’s weakening was “rapid and one-sided”. Kanda said he would not rule out any options, including currency intervention. The markets have become accustomed to verbal intervention when the yen drops sharply and these verbal warnings don’t have much effect.

The concern is that the government could intervene and purchase yen, as it did in September and October 2022. At that time, the yen was below 151, but Tokyo could decide that it doesn’t want to wait for the yen to fall that low before it intervenes.

The Bank of Japan maintained its ultra-loose policy at last week’s meeting, and the divergence between the BoJ and other major central banks keeps hammering at the yen. The US/Japan rate differential has been widening as the Fed has tightened aggressively and is expected to raise rates further in the second half of the year.

The BoJ could provide some fast relief to the yen if it raised interest rates, but that doesn’t seem likely anytime soon. A more likely scenario is for the central bank to tweak its yield currency curve control, which sparked a yen rally when the BoJ widened its target band for interest rates. Governor Ueda, who took over in April, has sounded more receptive to tightening policy than his predecessor but so far he has toed the line and maintained a dovish stance.

USD/JPY Technical

• USD/JPY is testing support at 143.45. The next support level is 142.35
• There is resistance at 144.65 and 145.59