The US Treasury Department has added Japan to its foreign exchange (forex) “monitoring list” due to the country’s large trade surplus and recent interventions to support the yen, while the USD/JPY exchange rate surges past 159.00, approaching levels that could trigger further action from the Bank of Japan.
In this context, Finbold turned to ChatGPT-4o, OpenAI‘s most advanced artificial intelligence (AI) model, for insights on finance and the Japanese Yen.
Overall, the chatbot forecasts USD/JPY to test the 160.0 resistance before facing a potential intervention by Japan. For the short term, ChatGPT-4o believes the pair’s exchange rate can go as low as 158.0, testing support.
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Breaking from this level could set a new price target at 157, while the opposite is unlikely, given the Bank of Japan’s historical influence on the forex market.
US Treasury adds Japan to monitoring list, cites large trade Surplus
According to a Reuters report, the US Treasury Department has added Japan to its “monitoring list” for foreign exchange practices. However, the Treasury stopped short of labeling Japan or any other trade partner a currency manipulator, as Bloomberg stated.
The decision came after Japan intervened to support the yen earlier this year. Moreover, the Treasury highlighted Tokyo’s large bilateral trade and current account surpluses as key factors in its decision.
The Treasury’s semi-annual currency report found that none of the countries examined met all three criteria, triggering “enhanced analysis” of their foreign exchange practices during the four quarters through December 2023.
Countries are automatically added to the list if they meet two of the three criteria: a trade surplus with the U.S. of at least $15 billion, a global account surplus above 3% of GDP, and persistent one-way net foreign exchange purchases of at least 2% of GDP over 12 months.
Notably, Japan, Taiwan, Vietnam, and Germany all met the criteria for trade surpluses and an outsized current account surplus. Meanwhile, Singapore met the criteria for persistent foreign exchange intervention and a material current account surplus. Malaysia only met the current account surplus criteria, but once on the list, it takes two currency report cycles to be dropped off.
USD/JPY price analysis as the Japanese Yen approaches ‘Yentervention’ levels
The US Dollar has climbed against the Japanese Yen, approaching intervention levels ahead of the weekend. Stronger than expected US S&P Global Flash PMIs overshadowed weaker housing data and weighed on the JPY, FXStreet reported. Therefore pushing the USD/JPY to trade at 159.59, with gains of 0.42%.
Analysts believe the USD/JPY remains upward biased, with the next resistance at 160.00. If cleared, the next target would be the year-to-date (YTD) high of 160.32.
However, the most likely scenario due to intervention threats is the USD/JPY first support of 159.00.
Interestingly, Japan’s top currency diplomat, Masato Kanda, stated that he did not see a problem with Japan being included on the U.S. currency monitoring list, adding that it was assessed according to mechanical criteria. The Treasury report noted that Japan had intervened in April and May 2024, outside the period covered by the report, buying yen and selling dollars to strengthen the yen’s value.
In conclusion, the US Treasury’s decision to add Japan to its forex monitoring list has drawn attention to the country’s large trade surplus and recent interventions in the currency market. As the USD/JPY exchange rate approaches intervention levels, market participants will closely watch for any further actions by the Bank of Japan or shifts in US Treasury policy.
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