The USD/JPY hit 149.85 today — getting uncomfortably close to the psychological 150 mark that triggered intervention last year.
I've been watching this currency pair closely, and it's clear Japanese officials are getting nervous. The yen has weakened about 6% since January, making imports more expensive for Japanese consumers already dealing with inflation that's high by Japanese standards (though still modest compared to what we've seen in the US).
"We will take appropriate action when necessary," Nakamura told reporters in Tokyo. That's diplomatic speak for "we might intervene in currency markets," but he stopped short of using those exact words.
What's fascinating is the delicate dance between Japan and the US on this issue. The last thing either country wants is to be accused of currency manipulation — especially with trade tensions already running high.
When I spoke with currency strategist James Wilson at Morgan Stanley last week, he pointed out that Japan spent an estimated $60 billion defending the yen in 2024 already. "They've got plenty of reserves to continue intervention if needed," he said, "but they'd prefer market forces to stabilize the currency."
For Japanese exporters like Toyota (TM, up 0.8% today) and Sony (SONY, down 0.3%), the weak yen has been a profit booster. But for the average Japanese household, it's driving up the cost of everything from energy to food.
What happens next? Keep an eye on that 150 level. If we cross it, I wouldn't be surprised to see Japan step in — regardless of what US officials might think.
