UOB warns that a disruption in oil supply could push the Japanese yen towards the 175 level! Official calls for help ineffective, could the Japanese yen's defense line collapse completely?

Note that UBS Group strategists have stated that even though Japanese officials have increased their intervention rhetoric, the yen's decline is expected to continue. These strategists believe that in a scenario of "prolonged turmoil," the USD/JPY exchange rate could reach 175 by the end of the year. Including Shahab Jalinoos, the strategists have suggested that if oil prices rise to around $150 per barrel, "using forex intervention to try to control inflation may ultimately evolve into providing a higher selling price for the yen for the market, while not necessarily changing the trend of the exchange rate." They added that efforts to curb inflation may instead rely more on fiscal measures such as energy subsidies. In this scenario, the market may conclude that Japanese policymakers do not intend to stop the yen from weakening in the midst of global stagflation, and the resulting trade conditions impact will significantly push the USD/JPY exchange rate higher. At the time this view was expressed, the USD/JPY exchange rate broke through the 160 mark for the first time since 2024 last Friday, prompting increasingly tough warnings from policymakers. Japan's top foreign exchange official Atsushi Mimura warned of the risks of taking "decisive action," while Bank of Japan Governor Haruhiko Kuroda reiterated that exchange rate fluctuations are a policy consideration. Finance Minister Koizumi also indicated readiness to respond, highlighting a high level of vigilance towards further weakening of the yen.