The Bank of Japan conducted a rate check in preparation for currency intervention, sending the yen temporarily surging to the upper ¥156 range. While the market remained alert to the possibility of intervention, attention focused on developments ahead.
In the foreign-exchange market from late on the 18th into the early hours of the 19th, the yen surged by about ¥1, temporarily reaching the upper ¥156 range per dollar. Sources said the Bank of Japan, acting on instructions from the Ministry of Finance, had conducted a rate check, asking financial institutions about exchange-rate levels in preparation for currency intervention. Market caution grew that the government and the Bank of Japan would intervene by buying yen and selling dollars, apparently prompting increased yen buying.
On the 18th, the Bank of Japan decided to raise its policy rate from around 1.0% to around 1.25%. The rate increase was intended to move toward monetary-policy normalization, but 2 of the 9 Policy Board members, considered part of the "reflationist camp," opposed it. Market expectations grew that the Takaichi (高市) administration would maintain an accommodative monetary-policy stance, and that afternoon the yen temporarily fell to the ¥158 range against the dollar, its weakest level in about 2 weeks, as yen selling prevailed.
At the end of July, the government and the Bank of Japan conducted coordinated yen-buying intervention with the United States to correct the yen's depreciation. The move appears to have been intended to discourage a renewed acceleration in yen weakness by signaling the possibility of intervention. As the market continues to be closely monitored, attention is focused on the pace of future rate increases and whether intervention will be carried out.