JPMorgan Says Japan May Have Limited Room for More Currency Intervention
Strategist Junya Tanase said Japanese authorities chose to intervene in the foreign-exchange market before the Bank of Japan’s policy decision on July 31 because they anticipated that Governor Kazuo Ueda might strike a dovish tone, which could trigger renewed selling of the yen. At this stage, it is difficult to send a clear signal on the pace of rate hikes, and the market has already largely priced in an October rate increase. “There is a risk that this policy communication will be interpreted as dovish.” If the authorities did indeed intervene, the scale was likely substantial, and the cumulative amount of intervention may already have exceeded the 15 trillion yen level reached in 2024, equivalent to $94 billion. “If foreign-exchange reserves decline further, it may be difficult to restore them to their original level through reserve management measures alone, which means the room for additional intervention down the line is limited.” Recent official remarks have mentioned using the Government Pension Investment Fund to curb yen weakness and restrain the rise in Japanese government bond yields. This suggests that, as room for FX intervention continues to narrow, policymakers have begun to consider alternative policy tools.