Japanese Yen softens, traders watch further US-Japan joint currency intervention

USD/JPY drifts higher to around 157.65 in Monday’s early Asian session.
Traders brace for more joint intervention as Trump backs Japan.
Trump backed down on Iran strikes in expectation of ‘rapidly’ reaching an agreement.

The USD/JPY pair recovers some lost ground to near 157.65, snapping the three-day losing streak during the early Asian trading hours on Monday. Traders remain on high alert for further intervention from the US and Japan after coordinated operations in Tokyo and New York last week triggered a dramatic rebound in the currency.

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Bloomberg reported that Japan’s Finance Ministry and US Treasury Secretary Scott Bessent are now working together to a degree unseen in decades to shore up the currency. Bessent said that the US wouldn’t hesitate to step into the market again. Meanwhile, Japan confirmed the first joint intervention with the US in currency markets in 15 years, according to a statement by Finance Minister Satsuki Katayama.

On the other hand, uncertainty in the Middle East could boost the US Dollar (USD) against the Japanese Yen (JPY). US President Donald Trump cancelled planned military strikes against Iran based on “rapidly” reaching a deal on its nuclear programme and the full reopening of the Strait of Hormuz.

Nonetheless, Iran’s Mehr news agency reported that Iranian officials said that Trump’s claim that Tehran had requested a pause “was nothing but a new lie” and that the Iranian armed forces were “on high alert and ready for any eventuality.”

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.

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