JPY Alert: Tokyo Shifts to "Guerilla Tactics" as Intervention Risk Spikes

The Japanese Ministry of Finance (MoF) appears to be altering its engagement rules regarding currency intervention. Following a sharp, unexplained drop in USD/JPY during Wednesdays London session, speculation is mounting that authorities conducted a “Rate Check”.

The “Rate Check” Signal

According to a report by Nomura, the price action witnessed this week mirrors the prelude to the massive 2.8 trillion JPY ($19.8 billion) intervention executed on September 22, 2022. On that occasion, a similar rate check occurred just eight days prior to the actual selling of dollars.

Nomura analysts warned clients that if the recent drop was indeed a rate check, the MoF is now at a higher alert level requiring vigilance for actual intervention.

The “Kanda Line” is Obsolete

Crucially, Nomura advises traders to stop looking for the so-called “Kanda Line”—a specific exchange rate level previously thought to trigger automatic intervention. Current data suggests no traditional metrics have flashed red, yet the risk remains acute.

The new Foreign Exchange Chief, Atsushi Mimura, has emphasized that “volatility” matters more than levels, and explicitly stated monitoring is not limited to USD/JPY but extends to cross-pairs like EUR/JPY.

Market Implications

The shift suggests a move away from “automatic” intervention based on predictable models to a more tactical, surprise-based approach. Traders betting on a gradual grind higher in USD/JPY could be caught offside by sudden liquidity injections, even if technical indicators do not suggest an immediate crisis.

Key Data Snapshot

• Previous Intervention Volume: 2.8 trillion JPY ($19.8 billion)
• Critical Reference Date: September 22, 2022
• Watchlist Pairs: USD/JPY and EUR/JPY