📝Unilateral Joint Intervention Will Be Key: ING

Our base case would be that BoJ FX intervention in the current environment can at best put a lid on USD/JPY in the 162/165 area rather than turn the trend. Taking into account high energy prices and Japan running substantially negative real interest rates, plus the dollar being in demand, Tokyo cannot expect a sustained drop in USD/JPY.

A joint US-Japanese intervention to sell USD/JPY would be far more significant than solely Japanese intervention. Here, not only would Washington be backing up Tokyo’s view that the yen has been unfairly targeted, but it could also develop a view that Washington felt that the dollar was too strong – perhaps linking back to some of the views expressed in Stephen Miran’s Mar-a- Lago paper.

Were we to see joint intervention with the US Treasury, we suspect this would raise some broader issues over dollar policy and be worth a move to the 155 area, with USD/JPY staying offered for longer.