The conundrum the BoJ finds itself in is that intervention right now is a battle it can’t win.

USD/JPY is unlikely to retreat in a durable fashion until the bank tightens policy or the cap comes off 10y JGB yields. Or US bond yields stabilise or (ideally) retreat. In short, it could get worse for the Yen before it gets better.

USD/JPY retreated from 151.95 to 135 a year ago after $43bn of USD sales, but the success was partly explained by the 50 bps drop in 2y UST yields and unexpected change in YCC settings in December. The BoJ may have checked FX rates on Tuesday with dealers, but we would not be surprised if actual selling of USD is delayed until Friday, or Monday morning during Asian trading hours, when US payrolls will have been published.