Japanese Yen Approaches 160, Japan's Finance Minister Warns: Ready to Intervene at Any Time

How will AI Ueda Kazuo’s statements determine the fate of the yen?

The yen exchange rate approaches the 160 level, with warnings of intervention intensifying. Markets are holding their breath after the Bank of Japan’s rate decision, awaiting the latest comments from Governor Ueda Kazuo.

Japanese Finance Minister Satsuki Katayama said at a press conference after the cabinet meeting on Thursday, “We remain highly vigilant,” and authorities are “ready to respond fully at any time” to exchange rate fluctuations, carefully considering the impact of currency movements on people’s lives. The yen previously touched 159.90, the lowest level since July 2024. After Katayama’s remarks, the exchange rate stabilized around 159.80.

The Bank of Japan then announced its rate decision, keeping the benchmark rate unchanged, in line with market expectations. Following the announcement, the yen rose slightly by 0.1% to 159.65, while the Nikkei 225 index fell 2.7%, tracking the overall risk-averse sentiment in Asia. Several analysts pointed out that the tone of Ueda Kazuo’s press conference will directly determine whether the yen can hold the critical psychological level of 160.

This round of yen depreciation was triggered by multiple negative factors: Fed Chair Powell signaled a hawkish stance, indicating that a rate cut would only be considered once there are clearer signs of inflation easing; meanwhile, Iran and Israel exchanged strikes on key energy facilities, pushing oil prices higher. The rise in oil prices combined with the yen’s continued weakness has heightened concerns about Japan slipping into stagflation.

Warnings of intervention intensify: Katayama emphasizes readiness to act

At the press conference, Katayama pointed out that Thursday is “a day when speculators are more likely to strike” — with the Bank of Japan Governor’s press conference, Japan-U.S. leader talks, and ongoing Middle East tensions all converging, increasing market volatility.

According to Bloomberg, Japanese authorities have repeatedly intervened in 2024, buying yen when it fell below 160 to support the currency. Katayama’s firm stance is seen by markets as a clear signal that authorities remain highly alert. In January, after the Bank of Japan’s meeting, coordinated efforts between the U.S. and Japan triggered a strong rebound in the yen, with the currency appreciating about 7 yen against the dollar.

Bank of Japan keeps rates steady; Ueda’s remarks become key variable

The Bank of Japan maintained its benchmark rate unchanged, with statements focusing on the impact of Middle East tensions and oil prices on inflation, while the negative impact on growth was relatively limited. Overall policy guidance remains largely unchanged. Overnight index swaps show that traders currently assign about a 58% probability to a rate hike in April.

Nomura Securities Chief FX Strategist Yujiro Goto said that while the statement added references to Middle East tensions and oil prices, it was generally in line with expectations, “the main scenario remains unchanged, and there is no need to rush to adjust outlooks.” He noted that Ueda’s hawkish tone has temporarily suppressed market attempts to test the upside of USD/JPY, and the overall meeting outcome is neutral. However, “if Kazuo Ueda’s wording leans dovish, the yen could come under renewed pressure.”

Hiroshi Namioka, Chief Strategist at T&D Asset Management, believes that the statements regarding crude oil’s impact on core CPI suggest that even cost-push inflation “leaves room for a rate hike in April,” and Ueda’s press conference “may be more hawkish than expected,” which could strengthen the yen and pressure stocks.

Eugenia Fabon Victorino, Head of Asia Strategy at SEB, said that the BOJ’s statement on war risks mainly focused on inflation impacts rather than growth shocks, with limited substantive policy change. She added that if Ueda’s comments are slightly dovish, USD/JPY could see support from buying.

160 level: psychological barrier and intervention game

Several strategists pointed out that 160 is the most critical psychological level for USD/JPY, and the market remains somewhat cautious about this level.

Rinto Maruyama, FX and interest rate strategist at SMBC Nikko Securities, said that reaching 160 “is not impossible,” but it is unlikely to stay firmly above 160 for long. Due to Katayama’s strong verbal intervention, traders may be reluctant to hold long positions before the three-day holiday. He also warned that if authorities only engage in verbal intervention after breaking 160, “USD/JPY is likely to continue rising,” but the actual likelihood of intervention remains low, making investors hesitant to feel completely secure.

Victorino also noted that this recent yen appreciation mainly reflects worsening trade conditions for Japan rather than specific speculative attacks on the yen.

The combination of rising oil prices and yen depreciation has heightened concerns about Japan’s potential stagflation risk. Analysts suggest that if Japan faces a scenario of stagnation coupled with inflation, it could lead the government to increase fiscal spending, complicating the Bank of Japan’s monetary policy tightening path.