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The yen surged to a two-month high against the US dollar on Monday, sparking speculation that Japanese authorities were intervening directly in the market to support the currency.
The yen gained around 1.1 per cent to breach the ¥154 level against the dollar in the first hours of trading in Tokyo. The rise followed a tumultuous trading session on Friday, when US authorities conducted “rate checks” of market participants, a move seen as a possible precursor to intervention.
The yen on Friday traded at around ¥159.14 against the dollar before intervention rumours.
Yujiro Goto, chief foreign exchange strategist at Nomura, said that, while there was not yet data to confirm market rumours, it appeared “highly likely” that the Japanese authorities had directly intervened in the market on Monday, given that currency moves had been larger than would normally be expected for purely verbal intervention.
He said such a sharp fall of the dollar would normally trigger “dip buying” by investors. “Without intervention, you would probably have seen the dollar recovering this morning, so I would not be surprised if there had been intervention by Japan,” said Goto.
The Japanese last intervened directly in foreign exchange markets on four occasions in 2024, buying almost $100bn worth of yen to support the currency as it slipped to a rate of around ¥160 against the dollar.
The yen’s rise accelerated after Atsushi Mimura, Japan’s currency chief at the finance ministry, told reporters on Monday: “We will continue responding appropriately against foreign exchange moves, working closely with US authorities as needed.”
His comments followed remarks by Japan’s Prime Minister Sanae Takaichi, who said on Sunday that her government would take “all necessary measures to address speculative and highly abnormal movements”.
Trader said the market had reacted to the idea that the US clearly shared Japan’s concerns over the yen’s prolonged weakness, reversing what had been more than three months of steady yen declines.
“Perception is key. If the market perception is that Japan is acting in co-ordination with the US, that makes verbal intervention much more effective,” said Benjamin Shatil, senior economist at JPMorgan in Tokyo. “This may have been enough to move the market.”
Japanese stocks fell heavily on Monday, propelled by the yen’s strength and concerns over its likely effect on corporate profits. A stronger yen reduces foreign currency earnings for Japanese exporters. The Nikkei 225 index shed 1.7 per cent in morning trading.
Shrikant Kale, a strategist at Jefferies, said: “Today’s trading is a knee-jerk reaction. It has always been the case when you see a massive yen movement. The number one request I’ve received in the last 24 hours is ‘Just give me the names of companies which are positively and negatively correlated with the yen’.”