The yen rallied sharply on Monday amid speculation that authorities may have intervened to prop up the currency again after coordinated action between the US and Japan last week.
The Japanese currency swung from a small decline to gain as much as 1.4% versus the dollar during morning trading in Tokyo. It then pared a large chunk of the move to trade around 156.70 per dollar during the London session, raising the prospect that jittery traders or algorithms may also have been the cause.
“The price action alone looks like intervention,” said Gareth Berry, a strategist at Macquarie Group Ltd. in Singapore. “The Ministry of Finance has a limited window of opportunity to do some damage on the USDJPY chart, and crack some support levels.”
Under the International Monetary Fund’s framework, a currency may be classified as free-floating if official intervention is limited to no more than three episodes over a six-month period, with each episode lasting no more than three business days. By that standard, Japan could intervene again on Monday, following its market operations on Thursday and Friday.Play Video
Japan and the US Treasury Department are now working together to a degree unseen in decades to shore up the currency, raising the stakes for anyone betting against it. Treasury Secretary Scott Bessent said the US wouldn’t hesitate to step into the market again. President Donald Trump added his stamp of approval to the recent action, describing the intervention as “a signal of friendship.”
Japan confirmed the first joint intervention with the US in currency markets in 15 years, according to a statement by Finance Minister Satsuki Katayama.
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While many in the market still question the capacity of authorities to change the long-term trajectory of the yen in the $9.5 trillion-per-day currency market, there is no doubt of their power in short bursts. In just two days at the end of last week, they reversed more than two months of losses in the yen, using a combination of direct purchases in the market, calls by officials to banks that deal in the currency and jawboning from Bessent and Katayama.
“It seems likely that authorities would intervene further in coming days if the yen begins to unwind the recent move, as was the case in May of this year,” Goldman Sachs Group Inc. strategists including Kamakshya Trivedi wrote in a note. “We continue to think intervention is an effective tool for authorities to buy some time before fundamental factors turn more positive.”
It was quoted at 157.40 to the dollar at the close of New York trading on Friday after advancing more than 1%. Before that it was hovering within a whisker of the weakest levels since 1986 near 164 against the greenback.
What Bloomberg strategists say:
The yen is quickening its advance to bring the May peak of 155.04/dollar into play. The rapid surge may spur trader concerns that another round of intervention is going on. It may also be more about investors acting to get out fast before the next steps are taken.
— Garfield Reynolds, MLIV Team Leader. Read more on MLIV.
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The currency has been under pressure from rising oil prices, Japan’s persistent budget deficits and a yawning interest-rate gap with the US and other major economies. The depreciation has sounded alarm bells in Tokyo, with rising import costs squeezing businesses and consumers.
A failure to arrest the drop would have impact that goes far wider than Japan as turmoil in the nation’s financial markets tends to spill out globally.
“The significance of recent developments may not be the intervention itself, but the message it sends: markets are increasingly coming to believe that excessive yen weakness is no longer viewed as solely Japan’s problem,” said Masayuki Nakajima, senior currency strategist at Mizuho Bank in London. “It appears increasingly likely that concerns in Washington over the risks posed by a sharp depreciation of the yen and rising volatility in the JGB market, particularly the potential spillover effects on the US Treasury market, are part of the backdrop to these developments.”
Volatility in Japanese government bonds jolted Treasuries and drew the ire of Bessent earlier this year. Meanwhile, the more the yen’s depreciation gives Japan an advantage in trade with the US, the more it is likely to irk Trump.
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Asked on Air Force One what it is that the US getting out of helping Japan, Trump said: “Financial benefit. We also, it’s also good for the world economy.”
Rebecca Patterson, a JPMorgan and Bridgewater Associates veteran who is now a senior fellow at the Council on Foreign Relations, said that Japan is already selling Treasuries to help fund its intervention. “The prospect of a larger, more lasting allocation shift, could pose a larger threat to Treasury yields,” she noted. “It’s in Bessent’s interest to convince Japan not to take that step.”Play Video
Bessent’s commitment to shoring up the yen was clearly shown when Reuters published a photograph of a notepad in front of him at a cabinet meeting in Camp David on Friday. Under a “To Do” title, it was written “Buy Japanese Yen (JPY) $5-10 bil.” He had earlier generated headlines by saying in a Fox Business interview on Thursday that the yen is “very undervalued” and “excess volatility” isn’t healthy.
JUST IN: U.S. Treasury Secretary Scott Bessent’s “to-do” list reveals plans to buy $5 billion to $10 billion in Japanese yen. pic.twitter.com/2CdFzWbqZ7— Polymarket (@Polymarket) August 1, 2026
“Given joint action with the US is still ongoing, USD/JPY could decline below 155 if stop losses are triggered,” said Moh Siong Sim, a strategist at the Oversea-Chinese Banking Corp. “But the success of intervention in reversing the JPY weakness depends on whether intervention is complemented by or is a substitute for more hawkish BOJ stance.”
The intervention on Thursday and Friday came as the Bank of Japan board gathered to set monetary policy. It voted 8-1 to keep interest rates unchanged, having raised them to 1% in June. While that’s the highest level since 1995, it is well below the 3.75% upper bound for the US policy rate.
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At a post-decision briefing, Governor Kazuo Ueda offered little fresh support for the currency. He opened the door to the possibility of rate hikes at upcoming meetings without signaling this was likely.
The Finance Ministry’s top currency bureaucrat, Atsushi Mimura, said on Monday that he will respond to foreign exchange in coordination with monetary policy.
“The comments imply that the BOJ should continue normalizing monetary policy to back up support for the yen from intervention,” said Lee Hardman, senior FX strategist at MUFG in London. Coupled with a “noticeably more hawkish” policy stance from Ueda last week, the BOJ may hike rates at its next meeting in September, sooner than market expectations for the end of the year, he added.
The yen recorded an intraday jump of more than 3% versus the greenback on Thursday, when Japan spent around ¥8.45 trillion ($52.8 billion) buying the currency, according to data compiled by Bloomberg and based on a comparison of BOJ accounts and money brokers’ forecasts. That would likely be the biggest-ever intervention on a single day by Tokyo.
“The fact that the US and Japan coordinated the intervention, and that the US took the unusual step of selling euro, indicates that there is a concerted effort to shift currency trends,” said Neil Newman, head of strategy at Astris Advisory Japan. “We should therefore expect further intervention if necessary.”
