It is hardly surprising that USD/JPY is trending upwards. The only question is why the BoJ and the Japanese Ministry of Finance (MoF) seem to think that the exchange rate does not reflect the ‘economic fundamentals’. At current rate differentials, JPY investments simply are not particularly attractive for foreign (and domestic) investors.

Until the Japanese monetary policy changes fundamentally, USD/JPY is likely to test another high again soon. The MoF will probably react again with a threat of interventions. But if the BoJ does not refrain from dovish comments and the MoF actually intervenes notably that is only going to prevent higher exchange rates temporarily.