Japan FX: JPY-buying intervention: Hedge against dovish risk at BoJ Governor Ueda’s press conference

Research evidence excerpt

Japan FX: JPY-buying intervention: Hedge against dovish risk at BoJ Governor Ueda’s press conference

Japan FX

31 July 2026 Citi Research

Dovish risk at Governor Ueda’s press conference

The BoJ has just announced it will leave its policy rate at 1%. While rates markets

are pricing in the possibility of an additional hike at the October meeting, the focus

of today’s meeting is whether BoJ Governor Kazuo Ueda can communicate in a

manner that satisfies these market expectations at his press conference.

The support rate for the Takaichi administration has been declining recently, and

JPY weakness and subsequent inflation are viewed as one of the reasons for this.

Under these circumstances we believe Governor Ueda will try to sound hawkish

today and to avoid further JPY deprecation.

However, we think it will be difficult for him to lay out a concrete roadmap to

additional tightening this autumn, as currently there is considerable uncertainty

globally due to the Iran conflict and other geopolitical issues.

Also, there may be questions about the independence of the BoJ at today’s press

conference, but we do not think Governor Ueda will significantly reinterpret

existing legislation and advocate for independence as the central bank.

Hedging dovish risks via JPY-buying intervention

Against this backdrop we believe the event risk of the BoJ meeting today is skewed

toward USDJPY upside. We think the apparent JPY-buying intervention last night

was a preemptive measure to hedge against the risk of JPY weakness.

Ultimately, we think the size of FX-intervention to buy the JPY could total ¥30trn or

more in this phase. Even so, markets are likely to grow concerned as to whether the

Japanese authorities have enough ammunition to defend the JPY.