According to James Smith Economist and Viraj Patel, Foreign Exchange Strategist at ING, intervention from the Finance Minister and the Bank of Japan is unlikely unless USD/JPY drops sharply to the 100 - 105 area. Key Quotes: “Chief Cabinet Secretary Suga’s comments that FX market moves are “one-sided” and “excessive” is a clear sign that officials are becoming increasingly nervous over JPY strength.” “Yet, while the odds of FX intervention have slightly risen, we still remain some distance away from any material MoF/BoJ action. With PM Abe reluctant to go down the route of competitive devaluation ahead of the G7 summit in May, intervention looks unlikely unless USD/JPY sharply drops into the 100-105 area.” “Unilateral FX intervention has historically been ineffective, with the impact typically short-lived. Only the Mar 2011 intervention following the tsunami crisis in Japan had any enduring effect on the yen; this was almost certainly due to the fact that the move was coordinated with other G7 central banks.” “Given that FX intervention is unlikely for now, the pressure has increased on the BoJ to deliver some form of stimulus at the 28 April meeting. The economic case for easing is clear, so the two main questions are (a) what options do the BoJ have and (b) can these measures reverse or even stem the JPY’s current upward trend.” “Overall, the BoJ may well find itself between a rock and a hard place should JPY strength persist ahead of the 28 April meeting. With intervention unlikely this side of 105, the BoJ’s biggest challenge will be to deliver a stimulus package that does more good than harm. Getting it wrong could prove costly in terms of fuelling JPY upside.” For more information, read our latest forex news.