USD/JPY: Intervention doubts with BoJ caution – MUFG
MUFG’s Derek Halpenny notes that recent Bank of Japan (BoJ) intervention, estimated around JPY 10 trillion, has so far failed to deliver a sustained Yen rebound, with USD/JPY still stable. Weaker Japanese wage and inflation data risk reinforcing BoJ caution even as Japan’s Ministry of Finance intervenes. MUFG still expects a June BoJ rate hike, contingent on clearer US–Iran de-escalation.
Intervention impact hinges on BoJ shift
"We now have a reasonable idea that the BoJ spent in the region of JPY 10trn buying the yen in at least two bouts of intervention since 30th April. This is roughly similar to the amount spent in Apr-May 2024 that ultimately failed to strengthen the yen and by July that year the MoF / BoJ were intervening again. The risk with this latest intervention is that the broader global backdrop again does not support yen selling (in Apr/May 2024 front-end US yields remained elevated between 4.75% - 5.00%)."
"The reports of clashes between the US and Iran in the Strait of Hormuz certainly raises the risk of a renewed jump in crude oil prices that scuppers Japan’s efforts to halt a move in USD/JPY through the 160-level. But for now, Brent crude oil remains close to the lows for the week, down 12% from the high on Monday. Trump referred to the clashes while the UAE stated that it had intercepted Iranian missiles and drones."
"Data released in Japan today could also add to risks that this bout of intervention fails. Labour cash earnings increased by 2.7% in March from a year earlier, down from 3.4% and below the consensus of 3.2%. Full-time base pay, excluding recent sample changes increased by 2.6%, down from 3.0%."
"With the growth definitely on the weaker side it could certainly reinforce the current cautious stance of the BoJ. Tokyo CPI data for April, released last week, also came in weaker than expected which could add to BoJ caution. The OIS curve indicates 18bps of hikes priced by the next meeting in June and we currently maintain our view that the BoJ will hike at that meeting."
"A combination of Middle East de-escalation and a more hawkish BoJ is the most plausible route to the MoF’s recent intervention having any sustained follow-through."
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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1. Technology stocks fell sharply as investor interest shifted toward energy and selected defensive assets. From October 10 to 16, the Nasdaq 100 declined 5.49% and the S&P 500 fell 1.95%, while the Dow gained 0.67% and WTI crude rose 10.41%. BTC, ETH, and SOL declined 1.27%, 2.65%, and 4.44%, respectively. This week's technology earnings will be an important test of whether revenue growth, margins, and cash flow can justify current valuations. Better-than-expected results could help stabilize markets in the near term. 2. Crypto continues to see pockets of strong activity, but a broad-based altcoin season has yet to materialize. CoinMarketCap's (CMC) Altcoin Season Index stood at 54 as of the October 18 UTC daily observation, below the altcoin-season threshold of 75, while BTC dominance rose to 60.08%. Our proxy leverage ratio fluctuated between 4.00 and 4.07 during the week, showing no sustained increase and suggesting limited appetite for additional leverage. Meanwhile, as major exchanges expand access to traditional financial assets, the recent sell-off in AI-related equities could attract short-term speculative capital away from crypto. Such capital rotation could make it more difficult for a new altcoin season to take hold. 3. Papertrade's loss-to-mine model has generated significant interest across the crypto community. The protocol combines high-leverage derivatives trading with zero slippage and a mechanism that rewards trading losses with PAPER tokens. Across the eight complete UTC days from October 10 to 17, cumulative reported revenue reached approximately $56.08 million, including $51.90 million distributed to token holders. With growing participation from key opinion leaders (KOLs), Papertrade has reportedly ranked among the top three platforms by profitability in the broader market recently. Assets to watch: BTC, ETH, SOL, ARB, OP, SKHYNIX, SKHY, META, TSLA, LRCX, and SPCX. Key research priorities this week: Cash flow performance in technology earnings; the relative discount and holding costs of the two SK Hynix contracts; and U.S. initial jobless claims and PMI data. Weekly market data cover the period through October 16, while research information was verified through October 18. Observation periods are specified separately for each chart.
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