Fu Peng: The Bank of Japan intervenes in the yen exchange rate; the key strategy is hidden in Buffett-style trading structures! [Fu Peng Talks 26]

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Bank of Japan FX Interventions and the Put Option Selling Strategy

View the world from the trading desk, Fupeng comments on finance. This video was recorded May 1, 2026.

This year, the Bank of Japan took its first action to intervene in the Japanese yen’s exchange rate, with interventions occurring around 160 yen to the US dollar. In fact, at the 160-yen-to-1-dollar level, the BOJ has already intervened four times cumulatively.

Extending the time frame, from 2024 to now, the BOJ has conducted four FX interventions. If we go back further, around 2023, the BOJ made its first move at about 150 yen to 1 dollar and made its policy stance clear. As I mentioned before, after their first intervention and statement, and until the second, the BOJ establishes a clear focus range for the exchange rate—in other words, between 150 and 160 yen to 1 dollar, the BOJ will closely monitor fluctuations and is ready to intervene at round-number levels within this range.

Looking back at the past two or three years, the yen’s exchange rate has mostly stayed in the 140–160 yen per dollar range. At 160, the BOJ will act decisively; at 150, the BOJ expresses clear concern (this level can be seen as its warning threshold); while below 140, the BOJ’s stance softens noticeably. Therefore, 160 yen/dollar is the upper limit for the exchange rate, 150 is the central level, and below 140 is the target area they hope to achieve. The core aim of these actions is undoubtedly to prevent another sharp depreciation of the yen as seen in the last two or three years.

Back in 2012, we went to Japan for research, after which Shinzo Abe came to power, kicking off a long depreciation cycle for the yen. As I have previously mentioned, over a long-term adjustment, as Japan’s economic structure has optimized over the past 30 years, combined with systematic reforms started under Abe and the boost of AI-era productivity since 2022–2023, these factors interacting have set Japan’s long-stalled “rusty gear” slowly turning again. Of course, Japan’s development must keep up with the US’s pace—it cannot fall far behind—which also sets a lower limit for the yen. The BOJ’s current guidance explicitly acknowledges this logic.

This leads many to wonder: Is it time to buy yen? Here it is crucial to clarify traders’ core thinking: first, even if Japan is raising rates now, there is still a large interest rate gap between yen and dollar. This means, if you use USD to buy yen, the carry cost will eat into returns—even if the yen stays in this range in the next two or three years, or even three or four years, the exchange rate’s volatility won’t be enough to offset the loss from the interest gap.

By contrast, Buffett’s operation strategy chooses to issue yen bonds, taking yen as the liability side to allocate into high-dividend yen-denominated assets. This effectively creates yen exposure while avoiding the inefficiency of using USD to purchase yen directly. This shows Buffett’s trades have a clear logical framework; for ordinary investors, using USD to exchange for yen is obviously not the optimal move.

So, what is the rational trading strategy for the yen? In fact, many traders now choose to borrow yen for operations, and one of the core methods is to sell yen put options. Based on the current trend, I judge that the exchange rate will not fall much further from the 160 yen/dollar level—not to 170, 180, or 190—so one can consider selling yen put options at levels like 160, 162, or 165 yen per dollar. In essence, selling yen put options is like indirectly borrowing yen: If the rate touches the strike, you take delivery of yen for dollars; if not, you continue collecting the spread. Exchange rate fluctuations here just give you clear boundaries and direction—the yen may have a slow appreciation, but it will be very gradual. As I said before, the yen has depreciated for ten years since 2012; the next phase may be a slow, decade-long appreciation, so slow that the yield loss cannot be offset, especially in the early years of this upward cycle.

Against this backdrop, the optimal strategy is actually aligned with Buffett’s thinking: either finance in yen to acquire Japanese assets, or sell yen put options (equivalent to selling USD/JPY call options), to earn option premiums. Whether it's Duan Yongping trading stocks, or Buffett’s market allocations, the core insight I want to share is not simply interpreting yen rates, but showing that we should observe these masters for their three-dimensional strategic thinking—these aren’t just “up/down” two-dimensional bets, but comprehensive approaches incorporating the time dimension, which I also wanted to share.

From another angle, the BOJ’s bold interventions are essentially selling USD and buying yen to stabilize the rate. So far, the four interventions have totaled about $100 billion injected into the market. This dollar liquidity has two effects: a change in money supply and a short-term boost for all liquidity-related assets during interventions. This is a chain reaction from FX interventions. However, once the yen is out of the focus range—say, as it nears the 150 yen/dollar warning zone—the probability of further intervention lowers; but as it nears the 160-yen upper limit, intervention through more USD selling and yen buying increases. We’ve used this operation mode for two years now, and have made considerable profits with rolling operations. It’s important to stress this isn’t simply using USD to buy yen—if leveraged, carry losses become even greater, which is not a sound trading logic.

This concludes my analysis of the BOJ’s FX interventions on the yen. I hope this has provided insights, see you next time.

Risk Warning & DisclaimerThe market carries risks; investments must be made cautiously. This article does not constitute personal investment advice, nor does it consider your special investment objectives, financial situation, or needs. Users should consider if opinions, viewpoints, or conclusions in this article fit their circumstances. You are responsible for all investment actions carried out based on this article. ```