Japanese authorities are changing their approach to supporting the yen by adopting surprise intervention tactics aimed at catching currency speculators off guard, according to sources familiar with the strategy.
The move marks a departure from previous practice, where officials often signalled the possibility of intervention through public warnings before entering the foreign exchange market.
Instead, the Ministry of Finance (MOF) is expected to intervene without advance notice, targeting speculative bets against the yen and increasing the risks for traders betting on further declines in the currency, two sources said.
Officials are also avoiding indicating any specific exchange rate that would trigger intervention, abandoning the so-called “line in the sand” approach that markets had become accustomed to.
The change reflects a more aggressive strategy designed to make it harder for investors to anticipate government action and profit from yen weakness.
Sources said any intervention would likely be triggered by the build-up of speculative short positions rather than the currency reaching a predetermined level.
The strategy comes as the Bank of Japan (BOJ) continues to warn about the economic consequences of a weak yen, reinforcing what sources described as a coordinated effort with the finance ministry to discourage further selling.
Even after raising interest rates last month, BOJ officials have repeatedly highlighted the inflationary pressure caused by rising import costs linked to the currency’s depreciation.
“Currency moves are among key factors affecting Japan’s economy and inflation,” BOJ Deputy Governor Ryozo Himino said in June, warning that a weaker yen could continue to push up underlying inflation.
Japan spent a record ¥11.7 trillion (about $72 billion) intervening in currency markets between late April and early May in an effort to support the yen.
However, the currency later resumed its decline, falling to a 40-year low of 162.66 against the US dollar this week.
One source said future intervention would be designed to maximise its impact on speculators.
“The timing of intervention is difficult. The purpose would be to hit speculators hard so if needed, authorities will step in.”
The source added that the government’s focus was no longer tied to defending a particular exchange rate.
“It’s not about yen levels” but more about how best to prevent excessive falls in the currency.
Finance Minister Satsuki Katayama has avoided stronger public warnings despite the yen’s recent losses, saying only that Japan stands ready to “respond appropriately” to currency movements.
Analysts said the government’s silence appears intended to make intervention more unpredictable.
“By refraining from commenting on the yen, Mimura is probably trying to make it harder for markets to gauge the next intervention timing,” said Rinto Maruyama, an FX and rates strategist at SMBC Nikko Securities.
Market participants are also watching US economic data and the Federal Reserve’s interest rate outlook, which could influence the dollar’s strength and affect pressure on the yen.
Erizia Rubyjeana
