USD/JPY declines below 158.00 as Japan signals intervention

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The USD/JPY pair attracts some sellers to near 157.80 during the early Asian session on Monday. The Japanese Yen (JPY) edges higher against the US Dollar (USD) amid intervention fear from Japanese officials. The US markets are closed in observance of the Martin Luther King Jr.

USD/JPY weakens to around 157.80 in Monday’s early Asian session.
Japan's Katayama said would not rule out any options to counter weakness in the JPY.
The upbeat labor market data and inflation remaining above the 2% target have lowered bets for a near-term Fed rate cut.

Japan’s Finance Minister Satsuki Katayama hinted at the possibility of joint intervention with the United States (US) to support the struggling currency. Katayama on Friday reiterated her warning that all options, including direct currency intervention, are available for dealing with the recent weakness in the Japanese Yen.

Felix Ryan, an FX strategist at ANZ, said, “Approaching the intervention stage is often accompanied by statements from Japan’s Ministry of Finance or government officials about yen levels, or by inquiries made to counterparties.”

On the other hand, improving US labor market data have pushed back expectations of further Federal Reserve (Fed) rate cuts until June. This, in turn, could provide some support to the Greenback against the Japanese Yen (JPY). Fed officials signaled no urgency to act further until they see more evidence that inflation will sustainably abate toward their 2% target. Morgan Stanley analysts updated their forecast for 2026, projecting one rate cut in June and another in September, instead of in January and April.

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.