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BoJ credibility concerns leave yen setup skewed after intervention

BNY says the yen saw weak intervention flows and lighter positioning, even as investors remained net long JPY and net short USD/JPY.

Reported · Written up by our desk · Major Pairs

BNY’s Geoff Yu said the Japanese yen entered the latest Bank of Japan decision amid signs of suspected intervention, but with weak flow momentum and lighter positioning. He noted that investors still appeared net long JPY overall and net short USD/JPY, even as forward and swap demand deteriorated and cash flows turned sharply negative.

Yu argued that fiscal concerns and a lack of policy assertiveness have weighed on confidence in yen assets. He said the BoJ kept policy rates unchanged, while Governor Kazuo Ueda said rate hikes could be accelerated if monetary conditions stay too accommodative, and also flagged that currency volatility is increasingly feeding into inflation risks as underlying inflation approaches the 2% target.

According to Yu, the combination of reported intervention and clearer BoJ guidance could quickly restore credibility and lead to sharp mean-reversion higher in JPY assets. He added that U.S. Treasury Secretary Scott Bessent recently said the yen looks very undervalued and that excessive currency volatility is not healthy.

Latest closeUSD/JPY 157.40 ▼1.7%

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