Japan intervenes to prop up yen with apparent US backing

Japan intervened in currency markets on Thursday, conducting large-scale yen-buying and dollar-selling operations in New York trading that sent the yen surging as much as 3.3% against the dollar — its biggest single-day gain since 2022. The move pulled USD/JPY from four-decade lows near 163 to as low as the 157-158 range, according to Reuters and multiple market sources.wtvbam+2

The intervention, which has not been officially confirmed by Tokyo, came with an unusual degree of apparent U.S. endorsement. Treasury Secretary Scott Bessent said in a Fox Business interview that the yen is "very undervalued" and has "substantially overshot equilibrium," adding that the U.S. views "excess volatility" as unhealthy. U.S. authorities also conducted so-called rate checks on the currency pair — a step widely seen as a precursor to or endorsement of intervention — according to Nikkei and Bloomberg reporting cited by multiple outlets.mufgresearch+2

Scale and Timing

Citi's trading desk recorded an estimated $8.1 billion worth of dollar/yen selling across core trading venues in roughly 10 minutes, according to a note to institutional clients cited by Reuters. The sharp move around 10:30 p.m. Tokyo time took the currency from roughly 162.80 to the 157 level in about an hour.japantimes+1

The timing was deliberate. Japan struck after the Federal Reserve held interest rates steady on Wednesday, which had already softened the dollar, and ahead of the Bank of Japan's policy decision on Friday. "Many market participants had expected it to take place after the FOMC and Bank of Japan meetings, so there may have been an intention to catch the market off guard," said Toru Suehiro, chief economist at Daiwa Securities.fxstreet+1

In a rare parallel move, South Korea also conducted dollar-selling intervention on Thursday, sending the won to a nine-month high, a market source told Reuters.wtvbam

Durability in Question

By Friday morning in Asia, the yen had already retraced to around 160 per dollar, underscoring analysts' warnings that intervention alone rarely produces lasting currency strength. Japan spent a record 11.7 trillion yen ($73 billion) intervening in April and May, but those gains were erased within weeks as the currency resumed its slide.mufgresearch+2

Finance Minister Satsuki Katayama declined to comment on the intervention, saying only that authorities are "always ready to respond with a sense of urgency". Japan's top currency diplomat Atsushi Mimura similarly declined to confirm the action.wtvbam

Attention now shifts to Friday's BOJ decision and Governor Kazuo Ueda's press conference. The central bank is widely expected to hold rates at 1%, but MUFG Mitsubishi UFJ Financial Group, Inc. ↘ 0.87% analysts forecast the BOJ will ultimately hike faster than markets expect — once in September and once in January 2027 — which they say underpins their view for USD/JPY to move sustainably below 160. Without that follow-through, analysts warn, Thursday's intervention may prove as fleeting as its predecessors.mufgresearch