Senate Republicans to challenge auto safety mandates in January - WSJ
Investing.com -- The latest surge in the U.S. dollar against the Japanese yen (USD/JPY) has revived questions about whether Tokyo might return to the market, but Bank of America notes that the backdrop today differs meaningfully from past episodes.
The currency pair has pushed into the 157s, edging close to levels that previously triggered action. Yet, BofA strategist Shusuke Yamada argues that both market dynamics and political conditions complicate a straightforward read of intervention risk.
He points out that “market levels and volatility point to rising risk in the 158–162 zone,” with price action already above prior intervention averages and volatility (vol) trending toward historical norms.
Get more insights on currency markets and FX strategy from top Wall Street analysts by upgrading to InvestingPro - get 55% off today
Two-week and one-month USD/JPY changes now sit near earlier intervention thresholds, and Yamada highlights that at 160, both level and vol would clearly exceed past averages.” A strong U.S. payrolls surprise could, he warns, push the pair deeper into the watch zone.
Still, intervention has historically required not just market stress but visible public concern, and this element appears muted. Google search activity for “yen depreciation” remains far below the spikes seen before the 2022 and 2024 interventions, while interest in inflation or cost-of-living pressures has also stabilized.
“Public concern may be much less intense than in markets and than prior intervention episodes though we should monitor the development as USD/JPY prints highs,” Yamada said.
Softer oil prices, rising wages and equities, and a public increasingly accustomed to a weaker currency all reduce political urgency.
Furthermore, the stance of Prime Minister Sanae Takaichi further complicates the calculus. Yamada says comments from the prime minister, her cabinet, and associated economists “have leaned dovish on macro policy, suggesting some yen weakness may be tolerated.”
Her support is strongest among younger and working-age voters—groups less sensitive to import-driven inflation and more cushioned by wage gains and overseas asset performance. Levels once treated as non-negotiable under prior administrations may therefore carry more flexibility today.
Diplomatic considerations also weigh on the decision. BofA’s report cites recent remarks from U.S. Treasury Secretary Bessent suggesting that rate hikes—not currency intervention—are viewed as the more appropriate tool for yen stability.
If the Bank of Japan refrains from tightening and the yen continues to weaken, it remains unclear whether Washington would back a dollar-selling, yen-buying intervention that could ripple across broader FX markets.
“Meanwhile, with tensions between Japan and China rising, the strategic importance of maintaining strong U.S.-Japan relations for Japan’s national security has only increased,” Yamada added.
Overall, while intervention risk rises as USD/JPY approaches 160, “the greater risk is that no action occurs at 160, leaving room for a move toward 165," Yamada concluded.