USD/JPY is once again trading just below the 146.00 level. If the market attempts another attack on the 146.00 it will become clear what strategy the Japanese ministry of finance (MOF) pursues. It has three options, in the opinion of economists at Commerzbank.

The 146 level will show what the MOF’s strategy looks like

“Either MOF intervenes again before the 146.00 mark has been breached. Or it only intervenes when higher USD/JPY levels are reached. Or it does not intervene at all any longer. Of course, the last option would be quite silly. This realisation would constitute a further significant negative factor for the yen. However, the first two alternatives are not without risk either.”

“If the MOF were to intervene at increasingly higher USD/JPY levels it would provide profits to traders betting on yen weakness. That might cause this camp to gain support and therefore weaken the yen rather than strengthen it in the end. However, even courageously defending the 146 mark is risky. The MOF has already burnt through FX reserves at rapid speed. The fact that these are finite would then be the next attraction that could cause market participants to speculate against the MOF.”