MNI BRIEF: Yen Breaks JPY150; Triggers Talk of Intervention

The yen broke through JPY150 on Thursday, marking a fresh 32-year low and increasing upward pressure on import prices as the currency weakens on the widening interest gap between the U.S. and Japan

The weak currency comes as the BOJ maintains its easing guidance and defends its yield curve control policy that targets a maximum 10-year yield of 0.25% while other central banks aggressively lift rates. The yen hit 150.0822 against the U.S. dollar before retreating. The yen’s fall has stoked talk of possible forex intervention to prop up the currency as the weak yen will further push up the cost of living as wage hikes will not keep pace with price rises.

Japan’s government and the Bank of Japan conducted a yen-buying intervention on Sept. 22 for the first time in decades, pointing to concerns over its sharp decline. However, the impact on the yen, then trading around JPY147, was limited. (See MNI BRIEF: Japan Buys Yen For First Time Since 1998)

The BOJ, based on a request from the Ministry of Finance, appeared to have conducted a yen-buying intervention - known as “stealth intervention" - worth about JPY1 trillion on Oct. 13, according to data released by the BOJ.

The current account balances held by commercial banks at the BOJ totaled JPY485.4 trillion on Oct. 13, down from the projection of JPY486.8 trillion, meaning the BOJ might have drained the funds from financial markets via intervention.

The BOJ has no effective tools to address the rapid and one-sided forex moves. Bank officials have no option but to wait for a slower pace of U.S. rate hikes next year before any change in the yen's trend is likely.