USD/JPY tumbles below 152.50 on intervention speculation, Fed rate decision looms

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USD/JPY falls to around 152.30 in Wednesday’s early Asian session.
Traders remain on alert to the prospect of a coordinated currency intervention by authorities in the US and Japan.
Fed interest rate decision will take center stage on Wednesday.

The USD/JPY pair slumps to over three-month lows near 152.30 during the early Asian session on Wednesday. The Japanese Yen (JPY) strengthens against the US Dollar (USD) on speculation about a possible coordinated intervention by Japanese and US authorities. Traders await the Federal Reserve (Fed) interest rate decision later on Wednesday, with no change in rates expected.

Japan’s Chief Cabinet Secretary Minoru Kihara said on Monday that officials will closely coordinate with the US and act in accordance with their joint finance ministers’ agreement last September. His comments echoed the finance ministry’s top FX official, Atsushi Mimura, who said Japan was keeping close contact with the US.

"While there are several potential culprits for the dollar’s drop, the main driver is the fallout from reports that the US Treasury is considering direct currency intervention," Jonas Goltermann, deputy chief markets economist at Capital Economics, said in a note.

Additionally, US President Donald Trump stated that the value of the USD is "great" when asked whether he thought it had declined too much. His comments exert some selling pressure on the Greenback against the JPY.

The Fed is widely expected to hold interest rates steady at their current target range of 3.50% to 3.75% at the conclusion of their two-day meeting on Wednesday. This follows three consecutive rate cuts in 2025. Traders will closely monitor the Fed Press Conference following the policy meeting, as it could provide important clues for the months ahead. Any hawkish remarks from Fed officials could underpin the USD in the near term.

(This story was corrected on January 28 at 00:15 GMT to say, in the first bullet point, that USD/JPY falls to around 152.30 in Wednesday’s early Asian session, not Tuesday.)

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.