Citi: Japan may intervene in the currency market if the yen weakens to 160

According to Citi's assessment, Japan's Ministry of Finance may intervene in the currency market to buy yen if the Japanese currency weakens to around 160 against the US dollar.

The bank noted that the so-called "rate check" conducted after the Bank of Japan's last meeting took place when the yen was significantly stronger than during the previous currency intervention. Citi estimates that if the yen weakens substantially again, Japanese authorities may seek to bring the USD/JPY rate down to around 150.

Amid pressure on the yen, market participants are closely watching Japan's currency policy. In recent days, the yen's weakness as it approached the 160 level has once again raised the risk of intervention.

At the same time, Citi noted that the cabinet reshuffle carried out by Japanese Prime Minister Sanae Takaichi did not produce any major surprises. Attention has now shifted to whether the government will declare an end to the deflationary period.

Citi does not expect such an announcement in the near term. The bank believes it will be more important to see how the government's stance on deflation changes in the monthly economic report published by the Cabinet Office.

According to Citi, if the Takaichi government begins to distance itself from its current reflationary policy, the already elevated interest rates in Japan could become a factor supporting the strengthening of the yen.

Japan's Finance Minister Satsuki Katayama recently stated that US President Donald Trump mentioned the yen's weakness during his meeting with Takaichi. Katayama also noted that she would continue coordinating with US Treasury Secretary Scott Bessent, which has heightened market expectations of possible intervention by Japan.