Japan has stepped up its verbal intervention campaign, with Prime Minister Takaichi and senior finance officials repeating that they are ready to take necessary action in the foreign exchange market if speculative moves push the yen too far. The message landed as USDJPY hovered close to recent highs, keeping traders on alert for the kind of surprise operations that rocked markets in previous years.

Why Tokyo is worried
A weak currency helps exporters, but officials in Tokyo are increasingly concerned about the political and social cost of another wave of imported inflation. Households are already struggling with higher food and energy prices, while the Bank of Japan has only just begun to move away from ultra loose policy. Rapid swings in the yen could undermine that delicate transition and damage confidence in Japanese assets.

Behind the scenes, authorities appear to be using a familiar playbook. First comes a steady drip of warnings about excessive moves, followed by more pointed language that stresses readiness to act without hesitation. If that does not calm markets, direct intervention in the form of large dollar selling orders remains on the table.

What it means for traders
For forex desks, the latest comments are a reminder that carry trades in yen are never a free lunch. As long as the interest rate gap with the United States and Europe remains wide, investors have an incentive to borrow cheaply in yen and buy higher yielding assets elsewhere. But the closer USDJPY gets to previous intervention zones, the greater the risk of an abrupt reversal triggered by official action.

Short term players may try to ride the trend while keeping tight exit plans and avoiding excessive leverage. Longer term investors, meanwhile, are watching for any shift in Bank of Japan guidance that could slowly rebuild the yen as a safe funding currency. Until that happens, talk of intervention will remain part of the daily soundtrack in the Asia session.