Japanese Yen bulls retain control on intervention fears, hawkish BoJ and USD weakness
- Japanese Yen kicks off the new week on a stronger note amid rising intervention fears.
- Takaichi warned against speculative moves following a rate check from Japan’s MOF.
- The divergent BoJ-Fed outlooks and sustained USD selling further weigh on USD/JPY.
The Japanese Yen (JPY) builds on its weekly bullish gap opening against a broadly weaker US Dollar (USD) and advances to a fresh high since November 14 during the Asian session on Monday. Japan's Prime Minister Sanae Takaichi warned against speculative moves on Sunday following rate checks from Japan’s Ministry of Finance and the New York Federal Reserve (Fed) on Friday. This heightens the chance of joint US-Japan intervention to stem any further JPY weakness and provides a strong boost on Monday.
Apart from this, the Bank of Japan's (BoJ) hawkish outlook and persistent geopolitical uncertainties turn out to be other factors underpinning the safe-haven JPY. The USD, on the other hand, dives to its lowest level since September 2025 on the back of the so-called 'Sell America' trade and bets that the US central bank would lower borrowing costs two more times this year. The divergent BoJ-Fed expectations contribute to the USD/JPY pair's intraday slump to sub-154.00 levels and back the case for a further depreciating move.
Japanese Yen sticks to bullish bias amid intervention fears, hawkish BoJ and sustained safe-haven buying
- Japanese Prime Minister Sanae Takaichi warned on Sunday that officials stand ready to take necessary steps against speculative and highly abnormal market moves. This comes on top of market chatter that the New York Federal Reserve conducted rate checks on the USD/JPY pair around midday on Friday, following a similar call from Japan’s Ministry of Finance. This suggests that authorities may be preparing to intervene in the currency market.
- The Bank of Japan, as expected, maintained short-term interest rates at 0.75% by an 8-1 vote at the end of a two-day meeting on Friday. Moreover, the central bank raised its economic and inflation forecasts, and signaled its readiness to continue hiking still-low borrowing costs. This further contributes to the Japanese Yen's outperformance against its American counterpart and drags the USD/JPY pair to its lowest level since November 14.
- US President Donald Trump's tariff threats to gain control of Greenland, along with a standoff with European allies, raised doubts about the long-standing NATO alliances and led to the loss of trust in global leadership. This, in turn, revives the so-called 'Sell America' trade and weighs heavily on the US Dollar amid expectations for more policy easing by the US central bank, which marks a significant divergence in comparison to the BoJ's hawkish tilt.
- Traders now look forward to the release of the US Durable Goods Orders data for short-term opportunities later during the North American session on Monday. The focus, however, will remain glued to the highly anticipated FOMC policy meeting, starting on Tuesday. Investors will look for more cues about the Fed's rate-cut path, which will play a key role in influencing the USD price dynamics and determining the near-term trajectory for the USD/JPY pair.
USD/JPY bears have the upper hand as breakdown below 154.00 pivotal support comes into play
From a technical perspective, a sustained break and acceptance below the 154.00 horizontal support, also nearing the 100-day Simple Moving Average (SMA), will be seen as a fresh trigger for the USD/JPY bears. Momentum has deteriorated as the Moving Average Convergence Divergence (MACD) slips below the zero line and extends lower, hinting at building bearish pressure.
The Relative Strength Index (RSI) sits at 32, near oversold, suggesting downside momentum is stretched, and a bounce could develop if buyers defend the 100-day SMA. A daily close below that support would risk a deeper pullback, while stabilization above it would keep the broader bullish structure in place.
(The technical analysis of this story was written with the help of an AI tool.)
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
