[MARKET ANALYSIS] USD/JPY breaches 162.00; jawboning from officials has now picked up

USD/JPY above 162.00:

• Overnight, the pair jumped above the 162.00 mark, amidst commentary from Chief Cabinet Secretary Kihara. He initially suggested that he would not comment on FX, which saw the pair breach 162.00. However, a few minutes later, he stated that they are always ready to take necessary action on Forex. The move largely unwound on that jawboning attempt.
• Thereafter, Finance Minister Katayama also commented. She warned that they will respond appropriately to currency moves at any time as needed, while action could include decisive action as agreed in the joint statement with the US.
• As a reminder, the latest bout of pressure in the JPY seemingly stemmed from Monday’s reports that the Japanese government is expected to call for “appropriate” monetary policy, aiming to dissuade the BoJ from further rate hikes.

Analyst Commentary:

• CIBC writes that whilst the MoF may attempt to defend the 162.00 mark, the risk is that further S&P outperformance could see further pressure in the JPY. If this is sustained, then analysts opine that the MoF may need to push back its “red line” towards the 163-164 mark. The bank forecasts a level of 162.00 in Q3’26, before falling back towards 160.00 by Q4.
• UOB believes the risk for USD/JPY is on the USD side, whereby a renewed bout of strength could see the pair confidently breach beyond 162.00, and towards 162.70 over a 1-3 week horizon. To the downside, analysts highlight “strong support” at 161.40.
• ING highlighted in a recent note that the MoF may opt to intervene in the pair on the 3rd of July 2026, where the US will be away for US Independence Day (4th Jul); this is because intervention during periods of low volume increases the effectiveness of such action.  ING adds that the NFP report will also be a key risk event for the pair. A strong report may see some attempt to defend levels beyond the 162.00 mark; it could also be the case that a USD-negative report could see officials attempt to exacerbate the theoretical move lower in USD/JPY.
• An analyst at JPMorgan suggests that they are on “red alert” for bold action.