Japanese Yen gathers strength to near 157.50 on US-backed intervention

USD/JPY softens to around 157.65 in Thursday’s early Asian session.
Bessent said the US backed Japanese Yen intervention to help stabilize Asian currencies.
The US July jobs data will be in the spotlight later on Friday.

Lallalit Srijandorn FXStreet

The USD/JPY pair trades in negative territory near 157.65 during the early Asian trading hours on Thursday. The Japanese Yen (JPY) strengthens against the US Dollar (USD) following a coordinated currency intervention by the United States (US) and Japan. The US Initial Jobless Claims report will be published later on Thursday.

Earlier this week, Japan's Finance Ministry Satsuki Katayama said 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.”

Bessent said on Tuesday that the US joined Japan’s effort to strengthen the JPY as the currency’s weakness risked destabilizing markets across Asia. Fears of further action from authorities could underpin the JPY and create a headwind for the pair in the near term.

"Intervention is a strategy that buys time and could end up being a waste without being followed up with BOJ rate hikes," said Kazuo Momma, a former BOJ executive who is currently executive economist at private think tank Mizuho Research Institute. "The fact the United States joined in the intervention is very grave. If the Japanese government were to block the BOJ from raising rates, that would be an act of betrayal to the United States,” Momma added.

All eyes will be on the US July jobs data on Friday. The US economy is expected to see 80,000 job additions in July, while the Unemployment Rate is projected to remain steady at 4.2% during the same period. In case of stronger-than-expected outcomes, this could help limit the Greenback’s losses.

Japan wage gains lift BoJ hike odds and support JPY repricing

Analysts at Brown Brothers Harriman note that stronger wage data have materially shifted expectations for the Bank of Japan’s next move. They highlight that “implied odds of a 25bps BoJ rate hike to 1.25% at the next September 18 meeting rose to 60% from a low of nearly 40% ahead of the wage data.” While they acknowledge that “underlying inflation in Japan remains subdued,” BBH argues that “risks are skewed towards further hawkish BoJ repricing in favor of JPY,” pointing out that “the policy rate is near the lower end of the bank’s neutral range (1.10%-2.50%) while the economy is operating above potential.”

Technical Analysis: USD/JPY keeps a bearish vibe in the daily chart

In the daily chart, USD/JPY extends a bearish near-term bias as spot holds below the 100-day simple moving average (SMA) and the Bollinger bands’ 20-day SMA. The pair is sliding away from the recent volatility envelope, with price now closer to the lower band than the upper one, while the Relative Strength Index (14) at 27.96 sits in oversold territory, hinting that downside pressure is stretched but not yet reversed.

On the topside, initial resistance emerges at the 100-day SMA near 160.00, followed by the Bollinger 20-day SMA around 161.40, before a stronger cap is seen at the Bollinger upper band near 166.26. On the downside, immediate support is defined by the Bollinger lower band at 156.55, where a pause or corrective bounce could unfold if sellers push the pair back into the volatility floor. The next contention level to watch is the May 6 low of 155.04.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

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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