Intervened again? The yen surged sharply in the short term.

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The Japanese yen has surged again, with USD/JPY dropping nearly 100 points in the short term, breaking below the 157 mark and hitting a more than two-month low, continuing its rise after Japanese authorities intervened at the end of April. The market generally interprets this sharp rally as a signal of another intervention by the authorities, and the 157 level is gradually becoming the Ministry of Finance’s new exchange rate defense line for the yen.

On Wednesday, the yen rose to as high as 155.04 against the dollar, the strongest since February 24, with an intraday gain of up to 1.8%. Previously, on April 30, Japanese authorities returned to the foreign exchange market after more than a year, and the yen surged about 3% intraday on that day. Sources told Bloomberg that intervention did occur; according to analysis of Bank of Japan account data, the authorities used about $34.5 billion this time.

Japanese officials have not officially confirmed the above actions so far, and the Ministry of Finance has not responded to requests for comment during national holiday non-working hours. Finance Minister Satsuki Katayama said on Monday that the government’s position on exchange rate intervention is clear.

As intervention suspicions once again cloud the market, investor focus shifts to the policy space and intentions of Japanese authorities—especially the implicit restrictions on the remaining number of interventions this year set by International Monetary Fund (IMF) guidelines, which are becoming a key variable affecting the market’s direction.

Sharp Rally Has Intervention Characteristics; 157 Becomes “New Defense Line”

Rodrigo Catril, strategist at National Australia Bank, said, "USD/JPY gapped down, showing all the characteristics of an intervention." He pointed out that recent price trends further confirm the Finance Ministry’s policy intentions: to prevent the yen from depreciating toward 160, while sending warning signals to speculative short sellers.

David Forrester, Senior Strategist at Credit Agricole CIB Singapore, noted that previous reports on IMF guidelines had "encouraged investors to push USD/JPY higher again," but this instead created an opportunity for the Ministry of Finance and the Bank of Japan to intervene again near 157. "157 appears to be becoming the new defense line," he said.

Ample Reserves, But Number of Interventions Restricted by IMF Guidelines

Goldman Sachs analysts estimate that, based on last week’s single intervention scale, Japan still has the capacity for up to 30 more interventions, with relatively ample ammunition. However, analysts expect the authorities to prudently reserve their resources and intervene only when the timing is most effective.

Looking back at 2024, Japanese authorities had repeatedly bought yen, spending about $100 billion in total. At that time, the yen fell to a low of around 160.17, and the authorities intervened successively at key levels such as 157.99, 161.76, and 159.45.

However, policy space is not unlimited. A Ministry of Finance official previously stated that, according to IMF guidelines, if Japan wishes to maintain its status as a “freely floating exchange rate” country, it can carry out at most two more three-day intervention operations before November this year. David Forrester pointed out that it is precisely this limitation that led investors to push USD/JPY higher again earlier—which also gives the authorities a window for more effective intervention at better price levels.

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