Citi: Japan’s MOF could intervene if USD/JPY breaches 100.00

In its latest outlook on USD/JPY, Analysts at Citi note that a possibility of intervention by Japan’s MOF could strengthen if USD/JPY breaks below 100 mark.

Key Headlines via eFX:

If the BoJ had not announced the new framework last week, pressure from the market and the politics would have forced it to adopt additional easing at its next policy meeting on Oct 31/Nov 1.

That would have triggered further JPY strengthening and a fall in stock prices that would most likely have completely destroyed the BoJ's credibility.

As it is, because the Bank didn't exert any concrete measure such as additional interest rate cuts last week, it could save them for next year while avoiding such fatal failure.

We suspect, in doing so, the BoJ has passed the policy baton to the MoF (Ministry of Finance). In particular, when the Yen appreciates beyond 100 against the Dollar the possibility of intervention could strengthen.

As such, we suspect the MoF would likely be forced to implement interventions when USDJPY breaks 100, even if it deteriorates relations with the US and other countries somewhat.