David Roche, veteran investor, president and global strategist at Independent Strategy, said that the recent actions of the Japanese government were aimed more at stabilizing the national currency than its significant strengthening.
Last week, the USD/JPY initially rose above the 160 level, updating a 34-year high, but then collapsed to 151.86, which was caused by alleged government interventions, which were estimated at about $60 billion. Currently, the USD/JPY is trading at 155.87, with an increase of 0.25%.
“The Japanese government's goal is a relatively stable yen exchange rate, they do not seek a particularly strong national currency," Roche said, adding that Japan has acted in a way so as “not to create inflation, which undermines the governor of Bank of Japan.
Meanwhile, the summary of the Bank of Japan's latest policy meeting released today revealed that the Central Bank was concerned that a sharply weaker yen risks driving up import prices. Since the beginning of 2024, the yen has declined by 10.5% against the US currency, which was due to the divergence of the monetary policy of the Fed and the Bank of Japan.
Roche said that a tightening of monetary policy by the Bank of Japan would be required to strengthen the yen. "This will require an increase in interest rates by at least 50 basis points and allowing “unsterilized intervention” of the yen. In other words, it shrinks the supply of domestic money," Roche added.