Finance Minister Suzuki commented last week that the authorities would respond appropriately to ‘excessive moves’ in the exchange rate but beyond that, finance officials have been quiet on FX recently. Still, market participants understand that intervention is a clear risk if the USD nears the 150 level (spot peaked at 151.95 in October last year) and the charts suggest that, after the USD’s advance above the June high (just above 145), the risk of a retest of 150 is hard to ignore. 

If JPY defence is a priority, direct FX intervention and allowing slightly higher domestic yields to coincide (even approximately) with a downturn in US bond yields (or some dovish cueing from Fed policymakers) would be optimal from a policy effectiveness point of view.