Japanese Yen receives support from stealth intervention risks
By Akhtar Faruqui
Updated: 2 Jul 2026
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USD/JPY continues its downside after pulling back from 40-year highs, trading around 162.40 during the Asian hours on Thursday. The pair loses ground as the Japanese Yen (JPY) captures support from growing trader expectations of government intervention.
- USD/JPY loses ground as the Japanese Yen captures support from growing trader expectations of government intervention.
- Japan’s MOF may intervene abruptly to clear short positions, avoiding any public "line in the sand" exchange rate trigger.
- US Dollar declines following a less hawkish tone than expected from Fed Chair Kevin Warsh.
USD/JPY continues its downside after pulling back from 40-year highs, trading around 162.40 during the Asian hours on Thursday. The pair loses ground as the Japanese Yen (JPY) captures support from growing trader expectations of government intervention.
According to Reuters, sources familiar with the matter indicate that Japanese officials are abandoning their traditional habit of telegraphing intervention risks. Instead, they are shifting toward a more targeted, stealth campaign designed to squeeze speculators and drive up the cost of betting against the weakened currency.
Japan’s Ministry of Finance (MOF) may step into the market abruptly to clear out speculative short positions, deliberately avoiding any public "line in the sand" exchange rate that might trigger action. Underscoring this shift, Finance Minister Satsuki Katayama reiterated warnings that authorities remain fully prepared to respond appropriately to currency market developments at any given time.
The USD/JPY pair also loses ground as the US Dollar (USD) declines following a less hawkish tone than expected from Federal Reserve (Fed) Chairman Kevin Warsh at Wednesday's ECB Forum on Central Banking. Warsh opted not to provide explicit guidance regarding the central bank's upcoming July policy decision. While he acknowledged that inflation remains too elevated and reiterated a firm commitment to the Fed's 2% target and institutional independence, his overall tone was perceived as less hawkish than anticipated.
Wednesday’s soft US economic data further cooled the hawkish sentiment surrounding the Fed outlook. June’s ADP Employment Change report showed that private payrolls grew by just 98K, missing Wall Street's 113K forecast and slowing from May's 122K increase. Additionally, the manufacturing sector showed signs of cooling as the ISM Manufacturing PMI edged lower to 53.3, missing the 54.0 consensus estimate. Traders’ attention is on the upcoming Nonfarm Payrolls (NFP) report for fresh insights into the labor market and the Fed’s policy path.
Japanese Yen FAQs
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.
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.
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.
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.
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