The yen has plunged 25% since March against the US dollar. Therefore, talks of Bank of Japan (BoJ) intervention have increased. Nonetheless, economists at Société Générale believe that currency intervention will not deter the USD/JPY pair upmove.

Two conditions necessary for a sustainable reversal in the JPY

“We see two conditions necessary for a sustainable reversal in the JPY: 1/ the BoJ abandons curve control (10y JGB cap 0.25%); 2/ a recession unfolds in the US and causes Treasury yields to crumble.”

“Unilateral intervention could keep USD/JPY from scaling new highs but won’t be enough to reverse the downtrend.”