Yen: Policy Delay Risks Weigh on USD/JPY - Commerzbank

Commerzbank analyst Thu Lan Nguyen notes that as the yen weakens against the dollar, market doubts over the Bank of Japan's commitment to monetary policy tightening are mounting, putting fresh policy pressure on the BOJ. USD/JPY is currently trading near 157.05066, with the yen remaining in a broadly weak position.

**Policy Delays and Credibility Concerns**

Nguyen believes the BOJ's latest rate hike failed to satisfy domestic officials or international partners, and mere threats of FX intervention are increasingly viewed by markets as insufficient. She warns that if tightening is delayed and overly cautious, it could ultimately undermine yen stability and economic growth. Market signals indicate that the effects of previous interventions by Japanese authorities and the U.S. Treasury have clearly faded, with the yen's gains against the dollar following the historic intervention in late July having been fully retraced within just a few weeks.

**Diminished Signal Effect of Intervention**

Nguyen emphasizes that intervention works not only through actual buying and selling of assets, but more importantly through its signaling effect—by which policymakers indicate shifts in policy stance. However, with unclear policy objectives and credibility issues at present, the signaling effect of intervention has been significantly diminished. She also notes that fiscal concerns remain a headwind for the dollar, and markets still view the 160 level in USD/JPY as a key dividing line.

**Dollar-Side Pressures and Yen Outlook**

According to Commerzbank analysis, rising U.S. Treasury yields continue to support the dollar, but if political pressure persistently threatens Fed independence, the positive impact of higher U.S. policy rates on the dollar could be weakened. For the yen, given the slower pace of its own policy tightening and the lack of a fundamental reversal in external dollar strength, it still faces passive adjustment pressure in the near term.