The pullback for USD/JPY has gathered momentum. However, economists at MUFG Bank expect this move to run out of steam without action from the Bank of Japan (BoJ).

Japan is considering intervening to support the yen

“The heightened risk of intervention and/or a shift in BoJ policy has already helped the yen to rebound in recent days but the comments will need to be backed up by action for the pullback in USD/JPY to prove sustainable.”

“Without policy action from Japan, USD/JPY’s upward trend could quickly resume on the back of expectations for monetary policy divergence from the BoJ and Fed. There has been no indication that the Fed is considering scaling back their own plans for policy tightening in the near-term.”