Foreign exchange market update: Bank of Japan intervention

After more than 10 years – Bank of Japan again active in the FX market

It was already becoming apparent and on September 22, 2022 the time had come. After a 10-year hiatus, the Bank of Japan (BOJ) returned to the foreign exchange market. Monetary authorities decided that the devaluation of the Japanese yen was one-sided and too rapid. USD/JPY saw its widest trading range of the year on that day. The exchange rate fell from USD/JPY 145.90 to 140.35 within a very short time.

Although the weak yen finally generated the inflation that had been targeted and hoped for for years (currently at around 2.9%), the situation in Japan is tense. The yen has lost more than 20 percent against the USD since the beginning of the year.

As it is often the case when a currency intervention occurs, the USD/JPY rate is already approaching the 145.90 intervention level and we will find out in the next few days whether the BOJ will continue to intervene or just try to slow the Yen’s decline. In the past, the central bank did not only appear once on the foreign exchange market, but intervened aggressively over several weeks.

It will be interesting to see whether the Japanese central bank will be a role model for other national banks.

Trading range at the day of the Bank of Japan intervention:

Source: Tradingview

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Disclaimer:
Please note that this elaboration was completed on 30/09/2022 14:55 CET.
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