Bank of America projects yen rising 6% after rare U.S.-Japan intervention

Bank of America ↘ 3.04% has sharply lowered its year-end dollar/yen forecast to 149 from 152, projecting the Japanese currency will strengthen roughly 6% from current levels near 158, following the first coordinated U.S.-Japan yen-buying intervention in over a decade.

Intervention Changes the Calculus

In a note published Wednesday, BofA analysts Shusuke Yamada, Izumi Devalier, and Tomonobu Yamashita wrote that the joint intervention has "raised the stakes for a successful defense of the yen," which will likely require follow-through from macroeconomic policy — specifically, faster rate hikes by the Bank of Japan.japantimes+1

The analysts argued that a September rate increase, rather than waiting until October, "would provide the BOJ with an opportunity to demonstrate its determination to get ahead of upside inflation risks".japantimes

The coordinated action came after the yen slid to a four-decade low near 164 per dollar, driven by the wide gap between U.S. and Japanese interest rates. Japan's Finance Ministry confirmed on August 4 that it had conducted a joint yen-buying operation with the U.S. Treasury the previous Friday, pushing the currency to nearly 155 and sparking a four-session rally before some gains were given back. U.S. Treasury Secretary Scott Bessent confirmed the action, saying it "countered disorderly yen movements".cnbc+1

'Ultimate Constraint' Lifted

BofA's analysts emphasized that U.S. participation fundamentally alters the dynamics of currency intervention. "With U.S. participation, however, the ultimate constraint on intervention has effectively been removed," they wrote, noting that unilateral action is typically limited by a country's foreign exchange reserves. According to Reuters, Japan sold nearly $60 billion to support the yen, while the U.S. spent between $5 billion and $10 billion.moomoo+2

The bank also raised its quarterly USD/JPY forecast to 153 from 154, saying coordination between the two governments points to a "shared objective" of long-term currency stability.japantimes

Kishida Urges Deeper Reforms

Former Prime Minister Fumio Kishida offered a more cautious view, telling Bloomberg on Wednesday that intervention "can buy some time" but cannot change the underlying trajectory without fundamental economic improvement. He pointed to a ¥370 trillion ($2.3 trillion) growth strategy spanning 17 sectors — including semiconductors and artificial intelligence — as the real path to sustained yen strength.news.futunn+1

"Simply announcing a numerical target at this stage will not immediately convince overseas investors or earn their trust," Kishida said. "The key is to present a clear long-term vision".news.futunn