When USD/JPY hit 145 in September last year, it prompted Japan to step in to intervene to prop up the currency for the first time since 1998. They then stepped in again in October when the pair hit 150 and that was a key trigger point in markets that started a trending move of sorts.
Of note, that saw USD/JPY retreat all the way from 150 to 128 in a span of roughly three months. And the dollar slide wasn't just limited to the above pair.
During the same period, EUR/USD rose from 0.98 to 1.10 while GBP/USD rose from 1.12 to 1.24 as the greenback weakened against most major currencies. Sure, the sharp corrections come after the dollar posted significant gains in the months before. But they were still strong trending moves and it also came when 10-year Treasury yields peaked at 4.33% at the time, before falling back to 3.33%.
So, if Japan does intervene, will it follow a similar playbook for the dollar?
I reckon there will definitely be bits and pieces that will be roughly similar. Treasuries are likely also to see a bit part correction and I wouldn't discount a significant drop in USD/JPY on having an impact on broader dollar sentiment.
We might not get as big a move as we saw back in October 2022 to January 2023, but traders definitely be spooked - albeit to a lesser extent this time around.
And unless the BOJ does really mean to step up to the plate on a policy pivot, any yen relief could end up being short-lived once again in the context of the bigger picture.
And when you consider the potential story that Treasuries have been responding to being oversupplied, any retracement in yields are likely to mean revert eventually and prop back up USD/JPY from a more structural view and timeframe.
This will be some food for thought as USD/JPY is starting to flirt with the thought of moving past 150 again this week.