The yen edged higher in thin trading with markets on high alert for more joint intervention by Japan and the US on Aug 3 after coordinated operations in Tokyo and New York last week triggered a dramatic rebound in the currency.
The yen edged about 0.2 per cent higher to 157.16 per dollar in early Sydney trading. The currency tracked moves with major peers amid a weaker greenback after US President Donald Trump held off on fresh strikes against Iran.
The early rise comes as Japan’s Finance Ministry 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.
Finance Minister Satsuki Katayama is set to announce as early as Aug 3 that the two governments are working in tandem, according to a person familiar with the matter, reinforcing a partnership that Treasury Secretary Scott Bessent has signalled indirectly but forcefully via the media.
While many in the market still question the capacity of authorities to change the long-term trajectory of the yen in the US$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 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.”
The yen was quoted at 157.40 to the dollar at the close of New York trading on July 31, the strongest since early May. Before that, it was hovering within a whisker of the weakest levels since 1986 near 164 against the greenback.
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 in 2026. Meanwhile, the more the yen’s depreciation gives Japan an advantage in trade with the US, the more it is likely to irk President Donald Trump.
“Japan is already selling Treasuries as part of intervention,” said Rebecca Patterson, a JPMorgan and Bridgewater Associates veteran who is now a senior fellow at the Council on Foreign Relations.
“The prospect of a larger, more lasting allocation shift, could pose a larger threat to Treasury yields. It’s in Bessent’s interest to convince Japan not to take that step.”
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 July 31.
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 July 30 that the yen is “very undervalued” and “excess volatility” is not healthy.
“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.
“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 July 30 and 31 came as the Bank of Japan (BOJ) board gathered to set monetary policy.
It voted 8-1 to keep interest rates unchanged, having raised them to 1 per cent in June. While that is the highest level since 1995, it is well below the 3.75 per cent upper bound for the US policy rate.
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 signalling this was likely.
“The Finance Ministry’s intervention is unlikely to mark a turning point for the yen, but we see scope for a short squeeze that pushes the yen at least temporarily higher against the US dollar this week,” said Homin Lee, a senior macro strategist at Lombard Odier Singapore.
“It can’t be sustained indefinitely against a backdrop of fiscal worries and gradual BOJ rate hikes.”
Japanese authorities bought yen and sold dollars during New York trading on July 31, according to one person with knowledge of the matter.
The Nikkei reported that the Japanese government and the Bank of Japan intervened to buy yen for a second straight day, while the Financial Times said separately that the Federal Reserve Bank of New York sold euros to buy yen on behalf of the US Treasury Department.
At least two major US banks were asked by the New York Fed to check the rate on the yen against the euro during the day, two people familiar with the matter told Bloomberg.
The yen advanced more than 1 per cent against both the dollar and the euro on July 31.
It recorded an intraday jump of more than 3 per cent versus the greenback on July 30, when Japan spent around 8.45 trillion yen (S$67.7 billion), 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.”
The yen was at 123.09 per Singapore dollar as at 7.35am on Aug 3. BLOOMBERG
