[MARKET ANALYSIS] : Factors leading to the ongoing pressure in the JPY, as markets eye intervention above 160.00

Price action:

• 
  USD/JPY has continued its ascent beyond the 157.00 mark in overnight trade, to top the 157.50 mark and make a fresh session high of 157.77. Worth noting that the pair has been subject to moves on both sides of the pair, with USD gaining amidst a hawkish repricing into the December meeting, whilst JPY has had domestic factors to digest.


• Amidst this, EUR/JPY hit a fresh multi-decade high of 181.72 while GBP/JPY is at a 206.04 YTD peak, looking to the 2024 best of 208.11.

Factors:

• 
  Starting with the USD side of the pair, recent strength in the USD has been facilitated by the ongoing haven allure as broader market sentiment took a hit in recent weeks – a factor which has been stopped in its tracks following strong results from NVIDIA. Most recently, the BLS announced its new data schedule, which showed that the October and November NFP report will be published after the December Fed meeting – this gives policymakers less data to work with into that confab. Lastly, the latest FOMC Minutes showed a divided committee, with "many" members expecting no change into the December decision. As it stands, money markets currently price in only a 25% chance of a cut at that meeting.


• 
  As for the JPY, there are a few factors behind the recent weakness. Starting with the fiscal side of things, there has been increased focus on the latest stimulus package. It was reported via the Nikkei that Japan’s government is reportedly considering compiling a stimulus package of around JPY 17tln, with a supplementary budget likely to be sized around JPY 14tln. An outlay of JPY 17tln that exceeds the JPY 13.9tln figure from 2024; set to be funded via greater tax revenue and likely extra bond issuance vs the 2024 figure of JPY 6.7tln. Moreover, the ongoing China-Japan geopolitical tensions may also be weighing on the Yen, or at least, preventing the haven allure typically seen for the currency. In brief, tensions flared up after PM Takaichi said that a Chinese invasion of Taiwan could threaten Japan and trigger a military response. China has recently cancelled flights to Japan, citing safety concerns for its own citizens.


• On Wednesday, 19th November, Japanese Finance Minister Katayama held a meeting with BoJ Governor Ueda, which essentially focused on maintaining a close coordination with the Government and the BoJ. A bout of pressure was seen following remarks that there was “no specific discussion on FX” – a comment perhaps in contrast to the ongoing jawboning seen from numerous Japanese officials seen in the prior weeks. Most recently, verbal intervention from officials returned on 20th November – with officials once again suggesting that they are watching FX moves.

Intervention / Levels:

• 
  Now focus turns to the potential of actual intervention. No specific “line in the sand” provided in terms of intervention itself, but analysts suggest that areas between 155-160 is unlikely (for USD/JPY), but moves above that round 160.00 mark could spark some intervention. As it stands, USD/JPY trades at levels not seen since mid-Jan of this year; the YTD high is at 158.87. Should that be breached, then markets will look back to July 2024 – which marks the last major time the JPY saw some intervention.


• 
  In terms of the timing, it is historically the case that intervention typically occurs alongside Dollar-negative newsflow/data – so perhaps some added focus on the day’s NFP report. Analysts at RBC take a look at the recent history of JPY intervention and highlight that an average of USD 22.6bln of USD (or JPY 3.5tln) was bought during each intervention between Sept 2022 and July 2024. Moreover, the bank highlights that FX intervention, which headed into BoJ hikes were the most effective.


• Analysts conclude that the most profitable trading day is on the day of the intervention, more-so than the second day, and volatility will offer “multiple points of entry” over the course of a week.

20 Nov 2025 - 08:25- ForexGeopolitical- Source: Newsquawk