Currency traders are watching closely for a possible round of Japanese intervention in the foreign exchange market as the Bank of Japan approaches its policy decision. The timing has drawn extra attention because the announcement will be followed by a three-day holiday, a period when thinner liquidity could make intervention easier to execute and harder for markets to absorb. The yen extended Wednesday’s gains into Thursday, reflecting nervous positioning ahead of the BOJ’s Sept. 18 meeting, where markets widely expect a rate hike. Investors are also looking back to April, when Japanese authorities waited until a domestic holiday period to carry out their first intervention of 2024. That precedent is feeding speculation that officials could use the upcoming Silver Week break in a similar way. Commonwealth Bank of Australia strategist Carol Kong said the holiday could add uncertainty to yen moves because market liquidity may fall even more, while a renewed test of prior intervention levels in USD/JPY around the BOJ meeting would raise the odds of official action.
Currency traders are on high alert for the risk that Japanese authorities could step back into the foreign exchange market as the Bank of Japan nears its policy decision.
Market participants say the timing matters. A three-day holiday will follow the BOJ announcement, and that has fueled expectations that officials could choose a period of thinner liquidity if they decide to act.
The yen extended Wednesday’s gains on Thursday, a sign of market tension ahead of the BOJ’s Sept. 18 policy meeting. Markets are widely expecting the central bank to raise interest rates at that meeting.
Investors are also drawing comparisons with April, when Japanese authorities waited for a domestic holiday period before carrying out their first intervention of 2024. That precedent has led to speculation that Japan could adopt a similar approach during the Silver Week holiday that begins shortly after the BOJ meeting ends.
Commonwealth Bank of Australia strategist Samara Hammoud said, “Silver Week could add to uncertainty around yen moves, mainly because market liquidity may fall further during the holiday. Over time, USD/JPY could again test the earlier highs that triggered intervention. If that happens quickly, especially around the BOJ meeting, the risk of further intervention would rise materially.”
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