USD/JPY traded near 156.30 on Thursday, down 0.05%, as the yen held firmer amid talk that Japan could act to limit further weakness. Japan’s top foreign exchange official, Atsushi Mimura, said authorities are ready to respond to speculative moves and are monitoring markets, without naming levels or confirming intervention.
The comments follow recent warnings from the Ministry of Finance, including Finance Minister Satsuki Katayama reiterating readiness to act against excessive speculation. Recent sharp swings in USD/JPY have been widely read as official action.
Bank Of Japan Signals
Bank of Japan March meeting minutes showed many members saw scope for more rate rises if the energy shock linked to the US-Iran war continues and feeds second-round inflation. Some also backed moving soon to address deeply negative real interest rates, supporting expectations of a possible June hike.
Attention now shifts to US data, with April Nonfarm Payrolls due Friday expected at 60K and the Unemployment Rate seen at 4.3%. Weekly Initial Jobless Claims are also due later on Thursday.
The US Dollar Index traded near two-month lows around 97.90, with markets pricing a more accommodative Federal Reserve stance.
We see USD/JPY trading at levels that make officials uncomfortable, creating a tense environment for the coming weeks. The underlying strength comes from the huge gap between US interest rates, which are over 5% higher than Japan’s. This fundamental pressure is clashing directly with the constant threat of intervention, keeping option volatility elevated.
Intervention Risk And Options
We remember the warnings from officials back in 2025 when the pair was just approaching 158. Now that we are significantly higher, the threat is even more real, and we believe authorities have already acted this year. Judging by similar actions in the past, like the estimated ¥9.8 trillion spent over a few days in 2024, any intervention could cause a sudden 5-7 yen drop.
The Bank of Japan did begin raising rates as we saw hinted at in their 2025 meetings, but the slow pace has done little to close the gap with the US. This confirms that intervention alone is a temporary fix, not a trend reversal. For derivative traders, this means selling out-of-the-money yen calls (USD/JPY puts) below major support levels like 155 could be a viable strategy, betting that the fundamental upward pressure will resume.
Unlike the situation in 2025 when we were anticipating a weaker US jobs market, the data in 2026 remains resilient. With US inflation proving sticky above 3% and job growth holding steady, the Federal Reserve has no reason to cut rates soon. This makes any significant, sustained downturn in USD/JPY unlikely without a major shock.
Given this standoff, we should look at options to manage the explosive risk. Buying short-dated out-of-the-money puts on USD/JPY offers a way to profit from a sudden, sharp drop caused by intervention, though high volatility makes this expensive. An alternative is a put spread, which lowers the cost but also caps the potential profit, offering a more defined risk for betting on a temporary downturn.
