Barclays Research flags the increasing risks of another round of Japan's MoF intervention to cap USD/JPY upside.

"Intermittent moves suggestive of intervention have continued to be observed in USDJPY even after 30 April, when the government and the BoJ are believed to have conducted JPY-buying intervention. As USDJPY has climbed towards 159. the highest level since 30 April, risks of another round of FX interventions are mounting. The MoF is scheduled to release its monthly intervention figures on 29 May, covering the period from 28 April to 27 May, but interventions since 30 April are already estimated at around JPY10tn.

Looking at the MOF's available resources for FX intervention, it held USD162bn in cash and deposits as of end-April, in addition to around USD1tn in securities. Even if it continues to intervene in FX markets, available resources remain sufficient for a while," Barclays notes.

"The summary of opinions from BoJ's April meeting struck a hawkish tone and BoJ board member Masu said in a speech on 14 May that it is desirable to raise rates "at the earliest stage possible". However, the OIS market is already pricing a c.80% probability of a 25bp hike at the BoJ's June meeting, which in turn implies that the JPY-positive impact of a rate hike itself is likely to remain limited (at least absent further communication nuance). BoJ board member Koeda is scheduled to speak on Thursday this week," Barclays adds.