USD/JPY recovery stalls below 157.00 as intervention risks linger

USD/JPY fails to find acceptance above 157.00 and heads for a flat weekly performance.
Japanese authorities' intervention warnings are keeping Yen sellers contained.
US Nonfarm Payrolls data is expected to show that job creation slowed down in April.

Guillermo Alcala FXStreet

The US Dollar (USD) trades moderately lower against the Japanese Yen (JPY) on Friday, on track to close the week practically flat, as Japanese authorities’ warnings about further interventions keep Yen sellers on their toes. The pair has stalled below 157.00 after bouncing from more than two-month lows on Wednesday, following another round of suspected action by Tokyo.

Japanese top currency diplomat Atsushi Mimura said on Thursday that Japan faces no constraints on how often it can intervene on currency markets to support the Yen, and that he is in daily contact with US authorities, committed to stemming speculative JPY moves.

The USD/JPY dropped more than 400 pips on April 30, in the first MOF intervention after the pair crossed the 160.00 level, considered the limit of tolerable Yen weakness for Japanese authorities. A Reuters report affirmed that Japan might have spent more than 5 trillion Yen (USD 32 billion) to boost the local currency, and recent price action suggests that smaller interventions have followed this week.

The Yen faces fundamental hurdles

These actions are keeping Yen sellers at bay for now, although the fundamental backdrop casts doubt about the sustainability of that policy. The comparatively low interest rates set by the Bank of Japan (BoJ), combined with risks to Japan’s economy from higher Oil prices amid the country’s delicate fiscal stability, put the Yen in a vulnerable position.

The US Dollar, on the other hand, is drawing some support from safe-haven trades on Friday as tensions in the Middle East escalate, dampening previous hopes of a swift end to the US-Iran war.

Apart from that, investors will keep an eye on the US Nonfarm Payrolls report, due 12:30 GMT, which is expected to show the US labor market added 62K jobs in April, a significant slowdown in employment creation compared with March's 178K gains. The precedent of a stronger-than-expected ADP Employment Change, however, maintains hopes of a positive surprise alive.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

Author

Guillermo Alcala

FXStreet

Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.

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