Japan and US Treasury Unite to Strengthen Yen
The Japanese Yen has strengthened sharply in recent days, with USD/JPY dropping from around 164 after suspected intervention by Japan's Ministry of Finance (MoF) and confirmed joint action with the US Treasury. According to MUFG's Michael Wan, past joint JPY interventions often coincide with turning points in USD/JPY, but fundamentals must shift for a durable move lower.
Historic joint action has been reported in Yen markets, with the media including the FT and Bloomberg stating that the US Treasury intervened on Friday by selling Euros to buy Yen. Japan's Finance Minister Satsuki Katayama confirmed this intervention, saying that both Japan and the US Treasury acted together and will not hesitate to conduct further joint intervention if necessary.
Historical episodes of joint JPY intervention show that these events have typically taken place around key turning points in USD/JPY. For example, in June 1998, USD/JPY fell sharply from 146 to 136 within a few days, helped by joint FX intervention. However, it took at least two more months and shifts in the underlying dynamics of the Asian Financial Crisis before USD/JPY's longer-term trend broke.
While MUFG thinks that the joint intervention is significant and could play an important role in clearing out Yen shorts, they caution that fundamentals likely still need to change for a more durable move lower in USD/JPY.