On Tuesday, as the Japanese yen once again approached the critical threshold of 1 USD to 160 JPY, Japan's financial authorities refrained from escalating verbal warnings, signaling a more cautious stance following their recent large-scale intervention. Finance Minister Sakanashi Arakawa reiterated that the government stands ready to respond to currency markets when necessary and warned against speculative volatility—but with a noticeably softer tone compared to his statement on April 30, when he had signaled an "imminent decisive action." According to data from the U.S. Commodity Futures Trading Commission (CFTC), net short positions in the yen surged to 114,667 contracts by late May, marking the highest level since Japan’s last intervention in July 2024, indicating that markets are once again testing Tokyo’s tolerance for further yen depreciation. Analysts suggest Japan is reluctant to act prematurely, partly because its massive intervention between April and May—costing 1.17 trillion JPY, a record monthly outlay—only briefly boosted the yen before the currency resumed its downward trend. Authorities may prefer waiting until the USD/JPY rate rises to a higher level before acting, aiming to enhance the effectiveness of intervention and avoid criticism over wasted resources. However, effective intervention may require coordination with the United States, which faces its own inflation pressures and may not be willing to support a weaker dollar.
Image source: internet
Original article: toutiao.com/article/1866951136514059/
Disclaimer: The views expressed in this article are solely those of the author.