Market sources have revealed that the Bank of Japan conducted a rate check, in which it queries financial institutions about foreign exchange rate levels. The check took place from late at night on the 18th into the early hours of the 19th, ahead of Japan's string of national holidays, and during that window the yen rose about 1 yen from the upper 157 range to the upper 156 range against the dollar. The move is believed to have been aimed at restraining speculative yen selling, and a rate check is positioned as a preparatory step toward currency intervention by the government and the Bank of Japan. In overseas markets, caution is growing over possible currency intervention by Japanese authorities. On the 18th, the Bank of Japan decided to raise interest rates at its monetary policy meeting, but because two board members opposed the move and it was not a unanimous decision, expectations for an early additional rate hike receded, and yen selling and dollar buying advanced. In the London foreign exchange market on the morning of the 21st, the yen traded in the lower 157 range.
BOJ rate check signals preparation for yen-buying intervention, which would strengthen the yen against the dollar.
BOJ hiked rates but the split vote and receding early-hike expectations leave JGB 10Y yield direction unclear; rate check/intervention risk adds uncertainty.
