MUFG Research discusses the scope for additional round of Japan's MoF intervention to cap USD/JPY upside.

"The probable intervention in Japan that took place on 30^th April and 6^th May was always about buying time and hoping that external factors would turn in favour of a stronger yen.

In previous interventions that happened – in 2022 and July 2024 US yields fell notably in the weeks following intervention and USD/JPY fell sharply. In April/May 2024 that didn’t happen and yields remained stable at elevated levels and intervention failed. This time, the external backdrop is even more challenging – US yields are rising sharply and in these circumstances the need for additional intervention is increasing by the day," MUFG notes.

It is also likely that the US believe the real issue is the monetary stance in Japan and Scott Bessent has been vocal in the past, criticising the excessively loose monetary stance, blaming it on the weakness of the yen. Bessent met with BoJ Governor Ueda at the G7 gathering in Paris and expressed confidence that Governor Ueda would “successfully” guide monetary policy. The BoJ is likely coming under increased US pressure to hike rates, and we suspect Ueda’s tone is set to turn hawkish ahead of the next BoJ meeting on 16^th June," MUFG adds.