USD/JPY languishes below 154.00 weighed by Yen intervention fears

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The Yen has reversed previous losses and is the best-performing G8 currency on Monday. Growing speculation of a joint US-Japan intervention to address JPY weakness has sent the USD/JPY pair nearly 3.5% lower from Friday’s highs, hitting fresh 11-week lows in the mid-153.00s.

USD/JPY remains depressed at multi-month lows below 154.00 after dropping 3.4% from Friday's highs.
Japanese PM Takaichi has reiterated Tokyo's commitment to act against Yen speculation.
Fed rate checks boosted fears of a joint US-Japan intervention and sent the US Dollar tumbling.

The latest Money Market Survey by the Bank of Japan (BoJ) released on Monday revealed that the recent Yen recovery has not been due to a Tokyo intervention. The BoJ’s projection shows 630 billion Yen outflows, numbers well below the multi-trillion levels that a Forex intervention would require.

On Friday, however, news that the US Federal Reserve was requesting US Dollar-Yen ratings from US major banks, a move that often precedes an intervention, prompted investors to scale down their Dollar long positions, wary of being crushed by a massive US-Japan joint action.

On Monday, the Prime Minister, Sanae Takaichi, reiterated Japanese authorities' commitment to act against speculative market moves in a TV show, providing additional support to the JPY.

In the US, the focus today will be on the US Durable Goods Orders, which are expected to have bounced up in November. The highlight of the week, however, will be the US Federal Reserve’s Monetary Policy Decision on Wednesday, which comes at a moment of high tension with US President Trump, who might be tempted to steal the show, giving further hints about the replacement of Chairman Jerome Powell, whose term ends in May.

(This story was corrected on January 26 at 11:10 GMT to say that the USD/JPY pair was at multi-month lows, not multi-month highs, as previously stated.)

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.