Japanese Yen rebounds amid barrage of verbal intervention and “sell the fact” trade

The Japanese officials were out in force today trying to smooth out the recent selloff in the Japanese Yen. We got the Finance Minister Katayama saying that they would take appropriate action against excessive forex moves without excluding any option and that she had deep talks on the matter with US Treasury Secretary Bessent.

We then got the comment from the Japanese Top Currency Diplomat Mimura doubling down on the verbal intervention by reiterating that would take appropriate action against excessive moves and that they are not ruling out any options.

Intervention worries have been increasing in the past days after USD/JPY broke above the 158.00 level and Japanese officials increased their verbal intervention. In 2024, we got two strong interventions around the 160.00 level. Given the fact that we touched the 159.45 level yesterday and the intensification of Japanese officials’ “jawboning”, traders are starting to get more cautious on further upside.

Moreover, Japanese PM Takaichi confirmed the intention to dissolve parliament at the next regular session calling a snap election in February. This has led to a bit of a “sell the fact” reaction in the market after traders “bought the rumor” on Friday when we got the first report from Yomiuri.

Unfortunately, this might not stop the depreciation in the Japanese Yen yet because the fundamentals remain unfavorable for the currency amid expansionary fiscal policy and the BoJ’s slow monetary policy normalisation keeping real rates in the negative territory,