Japan intervened in the foreign exchange market for the "second time" before the holidays? The market even speculates that "Japan not only boosted the yen, but also pushed down oil prices."
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On the eve of Japan’s “Golden Week” holiday (May 3 to 6), the country allegedly intervened in the foreign exchange market twice within less than 48 hours. What’s attracting even more attention is that, during the same window when the yen surged, Brent crude oil suddenly plunged. Multiple institutions quickly speculated that Japan’s actions might not be limited to the forex market, but could also extend to the crude oil futures market.
On Thursday (April 30), within minutes of the market opening, the yen surged unexpectedly. According to Goldman Sachs’ estimates based on trading data, there may have been over $30 billion worth of official buy orders that day, with USD/JPY dropping sharply from above 160 to 155.57, marking the largest single-day swing since December 2022. On Friday, with the Japanese market closed for the holiday, the yen retraced its gains during the session before surging again, finally stabilizing near 156.80.
The ripple effects of the intervention spread swiftly: the dollar came under pressure, Brent crude fell sharply, 10-year US Treasury yields declined, and US stocks hit new record highs that day, with the S&P 500 recording its largest monthly gain since November 2020. The simultaneous surge in the yen and collapse in oil prices made the market question: Did Japan intervene in oil prices at the same time?
Atsushi Mimura, Vice Minister for International Affairs at Japan’s Ministry of Finance, suggested after the intervention that further action could still be taken during Golden Week. He also took the rare step of extending this warning to the energy markets, stating “ready at any time to take action in crude oil futures trading.” The market took this as an indirect confirmation of the speculation about “intervening in oil prices.”
Oil price plunges in the same window: coincidence or coordination?
On Thursday, during the European morning session, Brent crude had surged to multi-year highs due to escalating tensions in the Middle East. Just minutes before Japan’s intervention, oil prices plummeted under massive sell pressure.
Rabobank immediately suggested that this “may be the result of Japan intervening in the forex market while simultaneously dumping oil,” and asked: “Have we reached the stage where the Ministry of Finance actively manages the oil market?”
Brent Donnelly, President of Spectra Markets, offered an alternative explanation from a position standpoint: “If you’re long oil, you’re most likely short the yen. When your yen position gets blown out, you’ll sell oil futures to stop loss.” In other words, shorting the yen and going long oil is a highly correlated trade. The rapid rebound in the yen triggered a chain liquidation of these positions.
No matter which explanation is correct, the intense linkage between crude oil and the yen within the same window is difficult to regard as mere coincidence.
Officials’ warnings extend to the oil market: The "dual signal" behind forex intervention
After the intervention, Mimura issued a dual warning at a press conference. Regarding the exchange rate, he stated: “I will not comment on future moves, but I would note that Golden Week has just begun.” Regarding oil, he made it clear: “Generally speaking, we are ready at any time to take action in crude oil futures trading.”
This statement is regarded by the market as an indirect confirmation of the speculation that “Japan is intervening in oil prices simultaneously.” According to Bloomberg, US officials had already been notified before the intervention, lending credibility to the speculation — Japan, as a major importer of Gulf energy, shares a strong motivation with the US to push oil prices lower.
Mimura also revealed that Japan and the US are “in extremely close contact,” with both sides’ assessment of the situation and actions aligned.
Scale and timing of intervention: Carefully chosen “Golden Week window”
According to Bloomberg’s analysis of Bank of Japan account data, Thursday’s intervention was around 5.4 trillion yen (about $34.5 billion), roughly equivalent to the 5.5 trillion yen intervention in July 2024, and one of the largest single interventions ever. Goldman Sachs’ trading desk estimates that official funds accounted for 60% to 65% of over $65 billion in abnormal trading volume on the EBS platform that day — the highest proportion in any intervention so far.
The timing of the intervention is equally intriguing. Japan’s Finance Minister Kaori Katayama told reporters before the holiday: “Whether you’re going out or resting, please always take your smartphone with you.” This unusual signal was interpreted by the market as intervention being imminent. Mizuho fixed income and FX strategist Jordan Rochester pointed out, traders are unwilling to “bet against another round of intervention,” especially with the low liquidity window of Golden Week overlapping with the UK’s Bank Holiday on Monday, which would further amplify the market impact of intervention.
Can the intervention remain effective?
The market generally doubts the long-term effectiveness of interventions. Rabobank notes that Japan faces structural pressures: as a major energy importer, high oil prices continue to impact its economy, while the Bank of Japan has only cautiously proceeded with normalization after years of ultra-loose policy. Authorities can temporarily resist market forces but cannot fundamentally change them.
Bloomberg cites traders saying that without further action, the yen rally driven by intervention risks fading. Kathleen Brooks, Research Director at XTB, states: "There have been many failed interventions in history, which means the yen’s rally may not persist."
Chris Turner, Global Head of Markets at ING, identifies a key variable: “The real game-changer is whether the US Treasury will step in.” In February this year, the Fed confirmed its NY trading desk had requested dollar/yen quotes on behalf of the Treasury, briefly boosting the yen.
Goldman Sachs believes the market is forming several “red lines”: $120 for crude oil, 10-year US Treasury yield at 4.5%, 30-year at 5.0%, USD/JPY at 160. These key levels fuel any trades seeking a calm in the situation. With Golden Week just beginning, the market remains highly vigilant about Japan’s next steps.
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