Japan Keeps Markets Guessing On Currency Intervention After Sudden Yen Jump, New York Fed Conducts Rate Checks

On Friday, Japan's sudden currency volatility reignited speculation about intervention after the yen jumped sharply. Japan Watches FX Markets Closely After Yen Jump Japanese Finance Minister Satsuki Katayama said that authorities are closely monitoring foreign exchange markets, reported Reuters. However, she declined to address speculation that officials had conducted so-called rate checks with banks — a move often viewed by traders as a precursor to direct currency intervention. Katayama spoke to reporters at the Ministry of Finance after the yen strengthened abruptly against the U.S. dollar, a move that caught markets off guard and fueled expectations that Tokyo may be preparing to step in to curb excessive currency swings. Japan's top currency diplomat, Atsushi Mimura, also refused to comment on the yen's sudden rise or on whether authorities had engaged in yen-buying activity. Yen Spikes As BOJ Holds Rates, Dollar/Yen Checks Reportedly Conducted The yen was volatile on Friday, experiencing two sudden spikes as traders monitored the possibility of intervention from Tokyo to halt the currency's slide. The yen had weakened to 159.2 per dollar, near an 18-month low, during a press conference by Bank of Japan Governor Kazuo Ueda after the BOJ kept rates unchanged, a separate Reuters report noted. Shortly after Ueda's remarks, the yen strengthened sharply to 157.3 per dollar. Market participants generally believed authorities had not intervened directly, but were conducting rate checks with banks. At the time of writing, the yen was down 0.01% over the past 24 hours, trading at 155.69 per dollar. However, in the past five years, the yen has lost 32.76 % against the dollar. Meanwhile, the New York Federal Reserve conducted rate checks on the dollar/yen pair around midday Friday, a Reuters report noted, citing a source familiar with the matter. Analysts said the move may have prompted a sharp drop in the dollar and could indicate that U.S. and Japanese authorities are preparing to act after weeks of sustained dollar strength against the yen. Political Uncertainty Adds To Market Sensitivity The renewed focus on the yen comes as Prime Minister Sanae Takaichi dissolved Japan's lower house of parliament ahead of a snap election scheduled for Feb. 8, reported the Associated Press. The dissolution of the 465-seat chamber officially triggers a 12-day campaign period beginning Tuesday. The move seeks to leverage her popularity to revive the ruling party's fortunes but risks delaying budget approval needed to support the economy and tackle rising prices. Takaichi, Japan's first female prime minister, has been in office for just three months after her October election, but is enjoying approval ratings near 70%. She is seeking an early election to leverage her strong approval ratings and secure a governing majority in the lower house, the more powerful chamber of Japan's bicameral National Diet, the report noted. Photo Courtesy: structuresxx on Shutterstock.com Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.