With liquidity thin during the US holiday week, is this week a "golden window" for Japanese authorities to intervene in the yen?

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As the US Thanksgiving holiday approaches, foreign exchange traders are closely watching to see whether the Japanese government will take advantage of this week’s thin liquidity to intervene in the yen. Historical data shows that Japanese authorities often choose to step in during low liquidity periods so they can use less capital to move prices more and maximize the effects of intervention.

On Monday, the Japanese market was closed for a holiday, and USD/JPY continued to hover near last week’s 10-month high of 157.90. However, after Finance Minister Shunichi Katayama stepped up his verbal warnings last Friday, the yen’s devaluation momentum has been temporarily curbed and seems to have found support at current levels.

This Thursday’s US Thanksgiving holiday and Friday’s "Black Friday" shortened trading hours create a potential intervention window for Japanese authorities. Analysts point out that intervention during periods of thin market trading can result in more significant "value for money" for official intervention funds.

It is noteworthy that, according to media reports, last Sunday (November 23), Takuji Aida, a private sector member of Japan’s key government think tank, sent further signals on NHK public television, explicitly stating that Japan can take the initiative to intervene in the forex market to mitigate the negative impact of the weak yen on the economy. This statement has further strengthened market expectations of possible official action.

Holiday trading creates conditions for intervention

This week, market liquidity is expected to shrink significantly due to the US holiday. The US market is closed on Thanksgiving Thursday, and trading hours are shortened on "Black Friday" Friday. Combined with Monday's Japanese market holiday, trading is expected to remain light throughout the week.

This kind of low liquidity environment has always been seen as an ideal time for Japanese authorities to carry out foreign exchange intervention. Many previous interventions have occurred during thin trading periods, allowing official funds to move exchange rates more quickly and significantly.

In the foreign exchange intervention mechanism, Japan's Ministry of Finance is responsible for deciding the timing of intervention, while the Bank of Japan acts as the agent to execute specific operations.

Currently, the Japanese government’s level of concern about the yen’s movement has clearly increased. Last Friday, Finance Minister Katayama substantially ramped up his verbal intervention, warning about possible official currency purchases, and this statement has temporarily supported the yen.

Analysts point out that the yen now seems to have found a temporary bottom at current levels, but whether it can hold this support depends largely on whether Japanese authorities will take actual action during this week’s "golden window."

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