Japan FX Nobody Stopping Yen Depreciation

The Japanese Yen remains under downward pressure driven primarily by the strong performance of Japanese equities rather than interest rate differentials. Intervention is expected only if the USDJPY breaches the ¥165/$ level.

Key Takeaways

• 1.The JPY is unlikely to stop depreciating due to a strong correlation between robust Japanese equity performance and currency weakness.
• 2.A second round of FX intervention by Japanese authorities is expected if the USDJPY exchange rate exceeds ¥165/$.
• 3.The Takaichi government's preference for reflationary fiscal policy over currency defense makes policy intervention less likely in the near term.

Table of Contents

• CITI'S TAKE
• Accelerating JPY depreciation
• Equity strength and JPY weakness
• Will there be a second round of intervention?
• What is the US intention?
• Nobody stopping JPY depreciation
• Increasingly dependent on external environment
• Appendix A-1

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