COMMENT-The perfect storm for JPY intervention is fast approaching

If Japan is considering intervening in the foreign exchange markets, Good Friday presents an optimal opportunity to execute this, particularly if pivotal Japanese and U.S. economic data lean towards further USD/JPY appreciation.

Major banks have already signalled to the markets through their models that the risk of intervention is at its peak, driven by a significant amount of commentary from Japanese officials. Currently, the risk of intervention is contributing to USD/JPY's containment in the lower 151 range, following its retreat from a new 34-year peak at 151.975 on Wednesday. Despite this, it is recognised within currency markets and by the Bank of Japan (BoJ) that USD/JPY's inherent trajectory is upwards, and any intervention would likely serve merely as a temporary deterrent.

On Friday, Japan will release the Tokyo Consumer Price Index (CPI), but a failure to meet or exceed forecasts will not bolster the JPY. Later in the day, the U.S. will publish its Personal Consumption Expenditures (PCE) data, the Federal Reserve's preferred inflation measure. A higher than expected reading would undoubtedly reinforce the USD.

Japanese authorities are acutely aware that both UK and EU markets will be closed for the Easter Good Friday holidays, thus any intervention would have a magnified impact. Related content