Japanese Yen gathers strength as US, Japan confirm rare joint intervention

USD/JPY weakens to near 157.40 in Tuesday’s early Asian session.
The coordinated intervention between the US and Japan supports the Japanese Yen.
The US July jobs report will be in the spotlight on Friday.

Lallalit Srijandorn FXStreet

The USD/JPY pair edges lower to around 157.40 during the early Asian trading hours on Tuesday. The Japanese Yen (JPY) strengthens against the US Dollar (USD) as traders remain on alert for further intervention after Japan and the US stepped into the foreign exchange markets last week to support domestic currency.

Japan's Finance Ministry Satsuki Katayama said on Monday that Tokyo and Washington conducted coordinated ‌Yen-buying intervention and will not hesitate to take further action. US Treasury Secretary Scott Bessent stated that the US wouldn’t hesitate to step into the market again, while US President Donald Trump added his approval by describing the intervention as “a signal of friendship.”

According to Bloomberg, Japan likely used about $34 billion in currency market intervention on Friday to boost the JPY, building on the previous day’s actions in coordination with the US.

"The view that FX intervention cannot have a lasting impact and merely alters short-term market flows seems right in many cases. However, depending on the circumstances and broader context, intervention can exert a significant influence on the market and trigger an inflection,” said Bank of America analyst Shusuke Yamada.

Traders will take more cues from Friday's US July jobs data, which could offer hints about the US interest rate path. The US Nonfarm Payrolls (NFP) are expected to increase by 83,000 in July, versus 57,000 prior. The Unemployment Rate is projected to jump to 4.3% in July, up from 4.2% in June. In case of stronger-than-expected outcomes, this could reinforce bets on a Federal Reserve (Fed) September rate hike and support the Greenback.

Yen support operation weighs on exporters and Asian risk tone

BNY Mellon’s Geoff Yu notes that “talk becomes action” in foreign exchange, with FX providing “the clearest example of coordination” as the US and Japan have “jointly intervened to strengthen the yen, their first such operation since 1998.” He points out that the Yen “rallied sharply,” a move that has “weighed on Japanese exporters and contributed to a softer Asian session.”

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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