The U.S. and Japan have launched a rare coordinated intervention to support the Japanese yen, with the Bank of Japan’s operation alone estimated at $52.8 billion. The move came after the yen tumbled to its lowest level since May 14, with USD/JPY plunging to 157.45 after hitting a year-to-date high of 163.9. The New York Federal Reserve, acting on behalf of the U.S. Treasury, sold euros for yen through Morgan Stanley and Goldman Sachs, marking the first American participation in a yen rescue in decades. Treasury Secretary Scott Bessent stated Washington "will not hesitate" to undertake further joint yen-buying interventions if required, signaling continued bilateral vigilance.
The intervention followed warnings from both nations after the Bank of Japan kept interest rates unchanged at 1% while three Fed officials voted for a rate hike. Rising odds of a U.S. rate increase on platforms like Polymarket, coupled with the prospect of an escalation in the U.S.-Iran conflict that could push oil and inflation higher, reinforced the dollar’s strength. The BoJ governor noted that with underlying inflation approaching the 2% target, upside risks warranted careful discussion. A Reuters photo of Bessent’s notepad at Camp David revealed a proposal to buy between $5 billion and $10 billion worth of yen. Kyodo also reported that the two countries may unveil a policy to deter speculative yen shorts.
From a technical standpoint, USD/JPY has broken below all moving averages, its RSI diving to oversold levels at 24 after a rising wedge reversal. Analysts see a potential drop to 155 in the short term, though a longer-term bounce is expected as fundamentals still favor the dollar due to wider interest rate differentials.
