The jury is still out on US-Japan joint intervention on the yen
It's been a hot minute since the joint intervention from the US and Japan on the yen currency. And as the dust continues to settle, the jury is still out on what this will all achieve.
There's no denying the symbolic nature of the US stepping in to help Japan in terms of intervention. However, any further attempts will draw political considerations and also invite questions on the US administration's policy stance on the dollar itself too. So, there's that to think about.
Besides that, there is also the question of how far does the US want to take things if the yen continues to fall further from hereon? We know that they could open up a bigger war chest if needed, but will they be willing to do so just to "help an ally"? The jury is still out on this one and the uncertainty is keeping traders in a bit of a bind.
JP Morgan is one to argue that the intervention impact is likely to be more muted and they are still maintaining their forecast for USD/JPY to hit 164 in Q4 2026.
"The cooperative posture of US and Japanese authorities to prevent yen depreciation appears to be considerably stronger than we had expected. The impact of intervention flows on supply-demand dynamics is unlikely to be very large, and the effectiveness of intervention is expected to depend largely on the announcement effect.
Given that neither Japan nor the United States appears to have a strong intention to push USD/JPY sharply lower, we see a low likelihood that coordinated intervention would lead to major yen appreciation that takes USD/JPY below 150. Accordingly, for now we maintain our existing USD/JPY targets (3Q26: 160, 4Q26: 164, 2Q27: 164)."
On the flip side, BofA is of the view that perhaps this latest intervention attempt could change the USD/JPY landscape - at least in the medium-term.
"There are three key points regarding the coordinated US-Japan intervention. First, the joint intervention implies the authorities' commitment to defending the yen is strong and that the cost of a failed intervention is high. Second, the shift to coordinated intervention with the US raises expectations for a broader policy framework aimed at stabilizing the yen. Third, coordinated intervention effectively blurs the ceiling associated with unilateral currency intervention.
With US participation, however, the ultimate constraint on intervention has effectively been removed. As a result, the market perception that FX intervention is ineffective could shift, at least over short- to medium-term horizons."
Meanwhile, MUFG sense that this latest intervention effort is not going to be one that will send shockwaves. Adding that it is just another ploy to buy time for the dynamics to change for the yen currency.
"On balance, we expect US intervention to support the yen to remain relatively small in scale. While joint intervention may prove more effective at helping to provide support for the yen in the near-term, we still believe that it can only buy time. There will need to be a change in fundamentals as well to encourage a sustainable reversal of the yen weakening trend that has been in place over the last five years.
More US pressure on Japan to allow a faster pace of BOJ policy normalisation as part of the joint intervention arrangement would an important step to help reverse yen weakness. The Japanese rate market has moved to price in a higher probability of a September hike which is currently priced at closer to 50:50."This article was written by Justin Low at investinglive.com.
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