Japanese finance minister verbally intervenes in the exchange rate again, causing the yen to plummet sharply and increasing the risk of intervention.

Japanese Finance Minister Kaori Yosano once again issued a verbal warning on exchange rate fluctuations, reiterating a strong sense of urgency. The market is becoming increasingly vigilant of the risk of potential intervention by the Japanese government in the future. Yosano stated, "I see unilateral and rapid fluctuations in the foreign exchange market. We will continue to assess the situation with a high sense of urgency." Earlier, the yen fell to its lowest level since February against the US dollar, approaching 154.50 yen to the dollar. Following Yosano's speech, the yen exchange rate rebounded to 153.81. Yosano pointed out that she issued a strong warning last Friday as she observed significant volatility in the foreign exchange market over the past two days. As of last Thursday, the yen fell against the US dollar by nearly 3 yen, while the Bank of Japan decided to keep interest rates unchanged that day. Despite Bank of Japan Governor Haruhiko Kuroda hinting at a rate hike coming soon in a press conference after the decision last Thursday, the market did not seem to believe it, causing the yen exchange rate to decrease. Aside from the market's response to the Bank of Japan's decisions and communication, several factors are putting pressure on the yen. Last week, Federal Reserve Chairman Jerome Powell's comments were more hawkish than expected, and investors believe that Japan's new Prime Minister Kishida Fumio is not keen on a rapid increase in interest rates. Market participants generally believe that the risk of Japan's intervention in the exchange rate is increasing, but most still think that actual action will take time. Japan's last intervention in the foreign exchange market was in July last year, when the dollar was around 160 yen. According to the latest research reports from Goldman Sachs and Bank of America, the immediate risk of Japan intervening in the yen exchange rate is not high at the moment, emphasizing that even if the yen accelerates its depreciation to the significant level of 155 yen to the dollar under the "Kishida Fumio trade" frenzy, the usual triggers for foreign exchange intervention "have not been met." Goldman Sachs estimates that the Japanese Ministry of Finance still has about $270 billion available for intervention funds before having to sell long-term securities assets, giving it the capability to match the scale of recent interventions in 2022 and 2024. Goldman Sachs states that intervention risk will significantly increase when the dollar reaches the 161-162 depreciation range against the yen. Bank of America, on the other hand, states that without a significant increase in speculative positions or volatility, the dollar against the yen "may test the 158 level, and only breaking through higher levels could lead to a meaningful policy response." The Japanese Ministry of Finance intervened in 2024 at continued and sharp depreciation levels around 157.99, 159.45, 160.17, and 161.76 yen to the dollar.