Japan Is Running Out of Options on Yen, TD’s Bharadwaj Says

Summary

Jayati Bharadwaj, head of FX strategy at TD Securities, argues that Japan has run out of options to support the yen, with past interventions and rate hikes failing to stem weakness. She sees USD/JPY rising toward 162 as hawkish Fed policy widens interest rate differentials, and believes coordinated intervention is unlikely.

• Japan’s interventions, soft checks, and rate hikes have all failed to strengthen the yen.
• Wide US-Japan interest rate differentials, reinforced by a hawkish Fed, are the key driver of yen weakness.
• USD/JPY is expected to target 162 next after 160.
• Japan’s cautious bias and lack of credible future rate hike signals prevent any lasting yen recovery.
• Coordinated currency intervention is seen as improbable, as the US is unwilling to sell dollars outright for Japan’s benefit.
• A yen reversal would require either a Fed dovish surprise or a BOJ hawkish shift, neither of which is expected.