• The USD/JPY extends its uptrend despite verbal intervention from the Minister of Finance. 
• The wide differential between US and Japanese interest rates is seen as a major factor contributing to the rise. 
• The idea that a lot is already priced into the US Dollar could limit USD/JPY upside.

The USD/JPY trades higher on Thursday, rising into the mid 155.00s, on the back of a recent step-rise in US Treasury Bond yields as the pair shrugs off yet more verbal intervention from the Japanese Finance Minister (MOF) Sunichi Suzuki. 

USD/JPY is pressured higher by the wide differential between US and Japanese interest rates, with the US Federal Reserve (Fed) setting the Fed Funds Rate at 5.25% - 5-50% and the Bank of Japan (BoJ) its cash rate at 0.0% - 0.1%. The huge advantage of parking capital in US Dollars (USD) compared to Japanese Yen (JPY) is a constant bullish factor for USD/JPY. 

In a statement to Parliament on Thursday, Sunichi Suzuki reiterated the tired phrase that the Finance Ministry would be “watching FX market closely” and “will take appropriate measures” if the Yen depreciates further. Yet his attempts at verbal intervention seem to be losing force with each repetition as the pair pushed higher regardless. Analysts remain skeptical about the impact even of direct intervention on the pair. 

“Even actual interventions, if they came, would hardly make a lasting impression on the market, because the MOF's firepower is limited,” says Antje Praefcke, FX Analyst at Commerzbank. 

For any lasting effect on the valuation of the Yen, the MOF’s interventions would have to be accompanied by interest rate hikes from the BoJ. 

“..interventions would have to be flanked by a credible monetary policy on the part of the BoJ, i.e. a regular cycle of interest rate hikes, in order to be convincing, otherwise they would just be "leaning against the wind" anyway. However, since we do not believe in a rate hike cycle, we simply lack the arguments for a rising JPY,” says Praefcke.