Japan steps into FX market for first time in two years to boost yen, sources say
Japan's Currency Intervention and Market Reactions
By Leika Kihara and Tamiyuki Kihara
Details of the Intervention
NEW YORK/LONDON/TOKYO, April 30 (Reuters) - Japan intervened to prop up the yen against the U.S. dollar on Thursday, its first official currency action in nearly two years, two sources familiar with the matter told Reuters, sending the Japanese unit currency higher by as much as 3%.
The sources, one government and another a market source, spoke on condition of anonymity as they were not authorized to speak to the media.
Immediate Market Impact
The dollar initially fell to 155.5 yen after the move, its lowest since March 2. It was last down 2.5% at 156.355 yen, on track for its largest single-day drop since December 2022.
Earlier in the session, the dollar hit as high as 160.725 yen, its strongest level since July 2024.
Background and Policy Context
Before Thursday's action, investors had amassed the largest short yen position in nearly two years, selling the currency against the euro, Swiss franc, British pound and Australian dollar on the view that neither rate hikes nor the threat of intervention would come to the currency's aid.
The bet was also the biggest since Japan last stepped into currency markets in 2024, setting up a fresh test of policymakers' resolve to curb yen speculation.
Government and BoJ Statements
Japanese Finance Minister Satsuki Katayama said earlier on Thursday that the time to take "decisive action" in the market was nearing, in her strongest signal yet of potential currency intervention to prop up the sagging yen.
Expert Analysis
"After weakening earlier today through 160 per dollar to levels that would have been very uncomfortable for the MoF, the case for active market intervention -- rather than merely yet another dose of verbal intervention -- would have strengthened significantly," said Chris Scicluna, head of research at Daiwa Securities in London.
"Indeed, given energy market developments, the Japanese government and BoJ (Bank of Japan) would both have been concerned about magnifying the inflationary impact and hit to corporate profits and real household incomes from events in the Middle East. Now that the MoF (Ministry of Finance) has drawn a firmer line in the sand for the yen, it is now the turn for the BoJ to reinforce the yen's stability with a rate hike in June."
Official Confirmation and Warnings
The Nikkei earlier, citing a government source, said officials had intervened by buying the currency, which was around its weakest versus the dollar since July 2024 earlier on Thursday.
Top currency diplomat Atsushi Mimura also said earlier the timing to take decisive action was approaching, adding that "extremely speculative" moves in the currency market were increasing.
The MoF threatened intervention in currency and oil markets and on Thursday, reiterated that action could be "on all fronts".
"This is our final evacuation warning to markets," Mimura told reporters. When asked whether he was alluding to the chance of an imminent yen intervention, Mimura said: "I think market players would know what I mean."
The Japanese finance ministry's foreign exchange division could not be reached for immediate comment.
Broader Market Implications
In line with the drop in the dollar, U.S. crude futures fell as well, sliding 1.4% to $105.37 per barrel, after earlier hitting a three-week peak.
Analyst Perspectives
London-based Elias Haddad, global head of markets strategy at Brown Brothers Harriman, believes that despite Japan's action in the currency market, the yen could weaken yet again.
"We still have quite a cautious Bank of Japan normalization cycle and with respect to the Federal Reserve, there's a higher higher bar for additional easing," said Haddadd.
"Also, upside pressure on crude oil prices remains intact, and that's a negative terms of trade shock for Japan...So until this fog of war abates and we start to see energy prices come down, our original bullish yen view will probably take a bit more time to unfold."
Going into 2026, Brown Brothers expected the dollar to fall to 140 against the Japanese currency. That forecast remains, Haddad said.
(Reporting by Leika Kihara and Tamiyuki Kihara and Makiko Yamazaki in Tokyo; Additional reporting by Alun John, Amanda Cooper and Dhara Ranasinghe in London; Gertrude Chavez-Dreyfuss and Laura Matthews in New York; Editing by Elisa Martinuzzi, Andrew Heavens, Andrea Ricci and Alistair Bell)
