USD/JPY Plunges Amid Japanese Intervention and Hawkish BoJ Stance

The USD/JPY exchange rate plummeted to around 159.12 on Friday after reports emerged of Japan intervening in foreign currency markets and a more hawkish stance from the Bank of Japan.

A record-breaking $9.8 trillion was spent by Japanese authorities to prop up the currency last month, with another $5.5 trillion invested shortly after. This strong action suggests that sudden, volatile liquidity gaps may occur if officials intervene again in the market.

The Bank of Japan maintained its short-term interest rate at 1%, but showed a willingness to hike further as inflation and financial conditions track projections. Governor Kazuo Ueda signaled a potential quickening pace of increases to avoid falling behind the inflation curve, citing 'overseas demand shocks and shifting global financial conditions'.

The Bank's governor was backed by eight members, with one member dissenting in favor of raising the rate to 1.25% due to upside inflation risks. The Dollar received mixed signals from geopolitics, as US President Donald Trump spoke of an agreement aimed at phased Hamas disarmament and eventual Israeli withdrawal from Gaza.