Brown Brothers Harriman reports that USD/JPY is trading directionless above 159.00 after Japan’s Ministry of Finance conducted record-sized FX intervention to cap the pair around 160.00. The bank notes that lower Oil prices may help pull USD/JPY toward 155.00, but a sustained break below that level would require a more hawkish Bank of Japan, which they see as unlikely for now.

Record intervention anchors Yen ceiling

"USD/JPY is directionless above 159.00. Japan's Ministry of Finance purchased a total of ¥11.735 trillion in the period from April 28 through May 27 to stem the surge in USD/JPY."

"That’s the biggest intervention amount on record and underscores authorities’ determination to keep a lid on USD/JPY around 160.00."

"The correction in crude oil prices takes some pressure off JPY and could help nudge USD/JPY lower to 155.00."

"But breaking materially below that level hinges on the Bank of Japan to lean more hawkish. It’s too soon to bet on that because almost all underlying CPI indicators softened in April."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)