Weakened Japanese Yen "adding insult to injury"! Bearish fundamentals still prevail, IMF rules limit intervention to only two more times in six months.

According to the guidelines of the International Monetary Fund (IMF), if Japan wants to maintain its free-floating exchange rate system, it can only intervene twice for three days each before November. A Japanese Ministry of Finance official on Monday cited IMF regulations stating that intervention for three consecutive days will be considered as one market operation. Earlier reports suggested that Japanese authorities intervened, causing the yen to sharply rise last Thursday and also seeing several intraday rebounds in the following trading days. The Japanese Ministry of Finance official stated on Monday that, according to IMF regulations, a maximum of three currency interventions within six months is in line with the free-floating exchange rate system. If the number of interventions exceeds this limit, the IMF often categorizes the exchange rate system as a floating exchange rate system rather than a free-floating exchange rate system. Despite this, market participants generally believe that the yen will return to a weak trend regardless of official intervention. The ongoing Iran conflict is unfavorable for the Japanese economy that relies on energy imports, and the still significant interest rate differential with the United States has also undermined market confidence, leading to continued pressure on the yen. According to data, options traders still believe that by the end of June, there is a probability of about 52% that the yen will depreciate again to 160 yen to 1 US dollar. Abbas Keshvani, head of Asian macro strategy at Royal Bank of Canada Capital Markets in Singapore, commented on further intervention, saying, "Will they use this move? Yes, especially when spot exchange rates approach the 160 mark. Will it be effective? They may be able to limit the spot exchange rates in the short term, but the fundamental factors that weaken the yen still exist." During the Asian trading session on Monday, the yen rose by 0.8% at one point, then narrowed its gains, sparking speculation in the trading hall about whether Japanese officials would intervene again to support the yen exchange rate. Earlier, the yen-to-dollar exchange rate fell below 160, and the Japanese government may have used around 5.4 trillion yen (approximately $43 billion) to support the yen last week. As of the time of writing, the yen-to-dollar exchange rate on Tuesday remained relatively stable at 157.24 yen to 1 US dollar. Analysts point out that the current question is whether authorities will be forced to take action again, but in an environment driven mainly by war, the threshold seems higher. Joey Chew, head of Asian foreign exchange research at HSBC HOLDINGS, said, "Japan has significant foreign exchange reserves, enabling it to intervene in the market. The key is the effectiveness of the intervention - whether the timing is right with oil prices continuing to rise." Japanese Finance Minister Koizumi Katsuki said on Monday that, under the Japan-US agreement, Japanese authorities can take decisive action against speculative exchange rate fluctuations. An official stated that even on public holidays in Japan, interventions can still be carried out as long as global markets are open. Some professionals in the market are discussing what would happen if Japan decides to carry out operations more than the three allowed by IMF guidelines. Rodrigo Catril, a strategist at National Australia Bank in Sydney, said, "We still have a long way to go, but history shows that IMF finds it difficult to enforce currency rules. Unless there are substantial changes in factors such as Japan's ultra-loose fiscal policy, it can be expected that Japan will intervene in foreign exchange in the future." Damien Loh, Chief Investment Officer at Ericsenz Capital in Singapore, said, "If the Bank of Japan does not raise interest rates at a pace proportional to inflation, the yen will only depreciate."