Citi Warns of Japan Intervention as Yen Weakens

Citi, a global financial services company, has predicted that Japan's Ministry of Finance is likely to intervene in the foreign exchange market if the yen weakens to around 160 per dollar against the US greenback.

The firm noted that rate checks implemented directly after the Bank of Japan meeting occurred when the yen was stronger than during the previous intervention. Citi added that the ministry may aim to push the exchange rate down to around 150 per dollar.

The Takaichi government's Cabinet reshuffle contained no major surprises, according to Citi. The firm said it does not expect a declaration from the Japanese government that deflation has ended immediately.

If the government shifts away from its current reflationary positioning, the rise in interest rates to date could become a tailwind for the yen, Citi said.