Friday was the last week of FY2023 in Japan due to Good Friday and overseas markets were closed. The market was quiet ahead of the financial results.

The Kanda Finance Minister’s verbal intervention on the dollar/yen exchange market was not powerful, and did not even break below 151 yen. The reason seems to be that people’s minds have been penetrated by the fact that, no matter what they say, holding Japanese yen does not earn interest and the value of the yen is falling rapidly.

The dollar was at 151.97 yen, a 2022 high, and Finance Minister Suzuki stated that he would take decisive measures. Decisive measures means intervention. Later in the evening, an information exchange meeting (tripartite meeting) comprising the Ministry of Finance, the Bank of Japan and the Financial Services Agency was held, at which Treasurer Kanda stated that the recent depreciation of the yen was far from in line with fundamentals and that speculative movements were clearly behind the yen’s depreciation.

The new highs are likely to be a reason for intervention. But so far, the USD/JPY exchange rate has not even broken below 151 yen. Many participants appear to want to buy below it. Perhaps around 152 yen is the ‘intervention line’ for the Ministry of Finance, and they cannot accept the yen continuing to depreciate without limit. However, even if the yen can be kept weak in the short term, it is difficult for Japan, which cannot raise interest rates significantly, to defend the yen market. We would like to wait and see for a few days, but if there is any intervention to lower the yen, we would like to buy into it.

If that is the case, it will be quite difficult to change this trend of yen depreciation. The BOJ cannot raise interest rates because it is concerned about zombie companies, but if interest rates do not rise, then the only way is for the yen to weaken. They also have to hedge against inflation, either by buying stocks or property.

An important indicator, the US PCE deflator, was released, but it was in line with market expectations and did not move at all. The month-end rebalancing was effectively over yesterday.

It will not be until next Tuesday that market liquidity returns in earnest. As it is the first week of May, a lot of data on US employment will be released. Of particular importance is the US jobs report on Friday. Until then, no decisive moves look likely.

The eurodollar has fallen below 1.08. The euro has not had a market-like market for a long time, but it is almost certain to enter a phase of rate cuts in the near future. Trendline support is at around 1.0775, but a break below could lead to a slightly lower market, involving stops. The Swiss franc has entered a downside phase after the recent rate cut. We expect the euro to follow suit.

Translated with DeepL.com (free version)