No important events are expected today.

USD-JPY is holding around 163.80 after the yen declined to a nearly 40-year low; however, the fundamental backdrop for continued growth has become less one-sided. Japan’s Minister of Finance declared readiness for decisive action in the FX market, while the US Department of the Treasury pointed to the undesirability of excessive volatility and the need for further steps by the Bank of Japan.

Dollar support remains significant. The 10-year US Treasury yield exceeds 4.7, Fed expectations have grown hawkish, and oil above 100 dollars reinforces inflationary and import risks for Japan. The interest rate differential continues to work against the yen, so a verbal warning alone may not be sufficient for its sustained strengthening.

Nevertheless, the current session is marked by a fresh official signal and the exchange rate’s proximity to levels where the likelihood of practical government action increases noticeably. The potential for additional dollar strengthening is limited by the risk of a sharp reduction in carry trade operations, whereas the reaction to intervention could be rapid. Therefore, the local Japanese factor is capable of outweighing the general dollar momentum, and the base scenario allows for a decline in USD-JPY.

Recommendations: SELL 163.80, SL 164.15, TP 162.95.