The Yen Is About to Face Its Policy Ceiling
The yen is once again approaching a threshold that the Bank of Japan has consistently defended in the past, putting policymakers back under pressure. Experienced traders may recognize a familiar pattern, as intervention is once again looking ever more likely. If this happens, the yen could quickly rise, leaving many participants behind.
One of the cleanest trades to take is when a central bank draws lines. The Bank of Japan (“BOJ,” “Nichigin”) has one such line. It’s not official, but it’s been de facto in place for 30 years, and the yen is fast approaching it once again. The last time we approached here, in the summer of 2024, the intervention unwound a carry trade that sent shockwaves through global markets. With a history of recent enforcement and the line still in place, there’s a clear setup for trading the yen.