The yen approaches 160, Japan's finance minister warns: ready to intervene at any time

The yen exchange rate is approaching the 160 mark, and warnings of intervention from Japanese authorities are rising. The market is holding its breath for the latest statement from Bank of Japan Governor Kazuo Ueda following the central bank's interest rate decision. Japanese Finance Minister Satsuki Katayama stated at a press conference after the cabinet meeting on Thursday, "We remain highly vigilant," and that authorities are "fully prepared to respond vigorously" to exchange rate fluctuations, taking into full consideration the impact of exchange rate changes on people's lives. The yen previously touched 159.90, the lowest level since July 2024, and stabilized around 159.80 after Katayama's remarks. The Bank of Japan subsequently announced its interest 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 by 2.7%, following the overall risk-averse sentiment in Asia. Several analysts pointed out that the wording of Ueda's press conference will directly determine whether the yen can hold the key psychological level of 160. This round of yen depreciation has been triggered by multiple negative factors: Federal Reserve Chairman Jerome Powell has signaled a hawkish stance, stating that he needs to see clearer signs of inflation declining before considering interest rate cuts; at the same time, Iran and Israel are attacking each other's critical energy facilities, driving up oil prices. The rise in oil prices combined with the continued weakening of the yen has heightened concerns about Japan falling into stagflation. Intervention Warnings Rise: Katayama Emphasizes Readiness to Act Katayama pointed out at the press conference that Thursday is a "day when speculators are more likely to act"—with the simultaneous occurrence of the Bank of Japan Governor's press conference, the Japan-U.S. leaders' meeting, and the ongoing developments in the Middle East, providing greater space for market fluctuations. According to Bloomberg, Japanese authorities have intervened multiple times in 2024, buying yen to support the exchange rate when it fell below the 160 mark. Katayama's strong remarks have been interpreted by the market as a clear signal that authorities are maintaining high vigilance. After the Bank of Japan meeting in January, coordinated actions between the U.S. and Japanese authorities triggered a strong rebound in the yen, which ultimately appreciated by about 7 yen against the dollar. Bank of Japan Keeps Rates Unchanged, Ueda's Press Conference Becomes a Key Variable The Bank of Japan has kept the benchmark interest rate unchanged this time, with the statement focusing on the impact of the Middle East situation and oil prices on inflation, while the negative impact on growth prospects received relatively limited attention, resulting in little change in overall policy guidance. Overnight index swap data shows that traders currently believe there is about a 58% probability of a rate hike in April. Yujiro Goto, Chief Foreign Exchange Strategist at Nomura Securities, stated that while the statement added descriptions regarding the Middle East situation and oil prices, it overall met expectations, "the main scenario remains unchanged, and there is no need to rush to adjust the outlook." He pointed out that Katayama's hawkish verbal intervention has temporarily suppressed the market's momentum to test the upper side of the dollar-yen exchange rate, and the overall outcome of the meeting is neutral, but "if Kazuo Ueda's wording leans dovish, the selling pressure on the yen may reignite." Hiroshi Namioka, Chief Strategist at T&D Asset Management, believes that the Bank of Japan's statement regarding the impact of crude oil on core CPI suggests that even cost-push inflation "leaves room for a rate hike in April," and that there is a "greater possibility of a more hawkish stance" from Kazuo Ueda at the press conference, which is likely to strengthen the yen and put pressure on the stock market. Eugenia Fabon Victorino, Head of Asian Strategy at SEB, stated that the Bank of Japan's description of war risks focuses more on inflation impacts rather than growth shocks, indicating limited substantive changes in policy guidance. She added that if Kazuo Ueda's remarks are somewhat dovish, the dollar against the yen may receive buying support. 160 Level: Psychological Barrier and Intervention Game Several strategists pointed out that 160 is currently the most critical psychological level for the dollar against the yen, and the market is still maintaining a certain restraint at this level. Rinto Maruyama, a foreign exchange and interest rate strategist at SMBC Nikko Securities, stated that it is "not impossible" for the dollar against the yen to reach 160, but it is expected to be difficult to maintain a significant position above 160 for a long time. 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 rely on verbal intervention after the exchange rate breaks 160, "the dollar against the yen is likely to continue rising," but the actual possibility of intervention remains low, making it "difficult for investors to feel truly at ease." Victorino also pointed out that the current rise in the exchange rate essentially reflects the deterioration of Japan's trade conditions, rather than specific speculative behavior against the yen. The simultaneous rise in oil prices and depreciation of the yen has heightened concerns about Japan's potential stagflation risks. Analysts noted that if Japan experiences a situation of stagnation alongside inflation, it may prompt the government to increase fiscal spending, complicating the path for the Bank of Japan to tighten its monetary policy