Yen Exposes Truth Behind Verbal Interventions. Forecast as of 04.08.2025
The Japanese government is concerned about the weakness of the yen. Does this indicate a tacit agreement between the US and Japan to allow the USDJPY pair to fall? Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The Japanese government is using verbal intervention.
- The BoJ is in no hurry to lower the overnight rate.
- The US labor market report has dealt a heavy blow to carry traders.
- If the USDJPY pair fails to hold above 148 and 148.55, consider short trades.
Weekly Fundamental Forecast for Yen
Every country has its share of controversial figures and public statements. Only time will tell what legacy Donald Trump will leave behind in the US. In Japan, however, a government facing declining approval ratings has begun making remarks that raise more questions than answers. The Finance Minister, Katsunobu Kato, has recently expressed serious concerns about the speculation in the currency market. He has insisted that exchange rates should reflect economic fundamentals. However, can anyone seriously argue that the dramatic swings in the USDJPY pair aren’t rooted in those very fundamentals?
The yen had a turbulent start in August, caught between opposing forces. First, dovish remarks from Kazuo Ueda after the Bank of Japan meeting sent USDJPY quotes soaring to a five-month high. Then came US labor market data, which quickly brought the pair back down. In both cases, the yen’s movements were a direct reflection of underlying economic fundamental factors.
Bank of Japan’s Overnight Rate
Source: Bloomberg.
The Bank of Japan held its overnight rate steady at 0.5% and raised its inflation forecast for the current fiscal year from 2.2% to 2.7%. Combined with news of a US-Japan trade agreement, this sparked optimism among investors that the downtrend may reverse. But Kazuo Ueda quickly poured cold water on those hopes. He made it clear that the 15% tariff deal hadn’t cleared up the uncertainty and that the BoJ would not base its rate decisions solely on inflation projections.
According to a survey of 45 Bloomberg experts, 44% deemed Kazuo Ueda’s comments as dovish, while 49% viewed them as neutral. At the same time, 42% of participants believe that the overnight rate will be increased in October, up from 32% in the previous survey.
BoJ Rate Hike Forecasts
Source: Bloomberg.
Should the BoJ and the Fed maintain their current interest rates, the wide yield differential between the two will continue to create favorable conditions for carry trades. This divergence in policy supports investor interest in the USDJPY pair, which has now climbed to its highest level since March.
Bulls were riding high until the release of the US employment report. The three-month average of job gains dropped to just 35,000, marking the lowest level since the pandemic. As a result, the derivatives market sharply revised its expectations for a Fed rate hike in September, with the probability jumping from 35% to over 80%. This shift caught carry traders off guard, leading to a sharp decline in USDJPY quotes.
The Japanese government’s recent comments on the yen’s speculative moves may hint at a tacit agreement with Washington to prevent further depreciation. A Bloomberg survey shows that 44% of economists expect the yen to play a pivotal role in the Bank of Japan’s policy decisions.
Weekly USDJPY and EURJPY Trading Plan
US economic cooling, the growing likelihood of the Fed resuming its monetary expansion cycle, and the US intention to weaken the dollar are increasing the risks of a fall in the USDJPY pair. If the asset fails to settle above the resistance of 148 and 148.55, one may consider short trades.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of USDJPY in real time mode
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