Japanese Finance Minister hints: Will intervene if the yen drops to 160

The yen continues to be under pressure as Japan’s Finance Minister Shunichi Suzuki issues a clear warning, suggesting that authorities are prepared to take intervention actions, establishing a clear exchange rate line for the market.

On Friday, according to Bloomberg, Suzuki stated in response to questions about the yen’s weakness that “authorities will respond firmly, including taking bold measures.” This wording is typically interpreted by the market as a precursor signal for foreign exchange intervention from Japanese officials.

Before the remarks, the USD/JPY exchange rate hovered around 159.70, approaching the 160 mark—which is the trigger point for Japanese authorities’ multiple market interventions in 2024. Following his comments, the yen briefly rose to 159.49, but the gain was subsequently narrowed.

This statement comes against the backdrop of ongoing tensions in the Middle East and soaring energy prices. The dollar has generally strengthened this month, with the Bloomberg Dollar Spot Index rising over 2% driven by inflows of safe-haven funds and a market adjustment of the Federal Reserve’s rate cut expectations. The direct catalyst for the yen’s pressure is the speculative selling triggered by rising oil prices.

The 160 mark: Historical intervention level approaches again

160 is a psychologically sensitive level for Japan’s foreign exchange authorities.

In 2024, the Ministry of Finance intervened multiple times when the USD/JPY reached or surpassed this level, utilizing hundreds of billions of yen to support the domestic currency. The exchange rate approaching this level again has made the market highly alert to whether authorities will repeat intervention operations.

Suzuki’s statement continues the consistent “verbal intervention” strategy of Japanese officials—first applying pressure on the market through wording before actually utilizing foreign exchange reserves.

The yen’s brief strengthening after this statement shows that the market still has some reaction to this signal, but the gains were not sustained, indicating that investors remain cautious about whether authorities will truly take action.

Speculation in the oil market: Intervention scope may extend to commodities

It is noteworthy that Suzuki not only focused on the exchange rate this time but also extended her view to the commodities market. She attributed the recent speculative selling pressure on the yen to fluctuations in the oil market, stating that authorities are closely monitoring broader market dynamics, including commodities.

According to a previous article from Wall Street Brief, the Japanese government is evaluating an unconventional plan—directly intervening in the crude oil futures market using foreign exchange reserves, establishing short positions to lower oil prices, thereby indirectly easing pressure on the yen’s depreciation. Finance Minister Suzuki this Tuesday shifted the focus from speculative behavior in the foreign exchange market to the crude oil futures market, stating that the latter is disturbing exchange rate trends and declaring, “The Japanese government is ready to take comprehensive action on all fronts at any time.”

Regarding oil prices, Trump on Thursday once again delayed the deadline for strikes on Iranian energy infrastructure and stated that negotiations with Iran are progressing “very smoothly,” promising not to attack Iranian energy facilities. This remark caused oil prices to temporarily retreat, and on Friday morning in Tokyo, the yen and Japanese government bond yields also gained some respite, but the effect was short-lived.

Suzuki also revealed that the G7 energy and finance ministers’ meeting will be held next week, with the situation in the Middle East expected to be one of the core topics. Meanwhile, Suzuki stated that the Japanese government will hold an emergency meeting on Friday to work with financial institutions on how to support companies facing financing pressures due to the Middle East conflict.

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