--- title: "[Market Insight] The US and Japan join forces to intervene in the foreign exchange market, the Japanese yen rebounds from a 40-year low" type: "News" locale: "en" url: "https://longbridge.com/en/news/294610147.md" description: "The US and Japan jointly intervened in the foreign exchange market, causing the yen to rebound from a 40-year low. The Bank of Japan maintained its interest rates but hinted at a possible rate hike, while the US Treasury bought yen to support Japanese authorities in curbing the depreciation of the yen. This move aims to alleviate import cost pressures and inflation, but it may also impact export companies. The market is focused on the pace of monetary policy tightening and subsequent trends" datetime: "2026-08-02T15:56:44.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/294610147.md) - [en](https://longbridge.com/en/news/294610147.md) - [zh-HK](https://longbridge.com/zh-HK/news/294610147.md) --- # [Market Insight] The US and Japan join forces to intervene in the foreign exchange market, the Japanese yen rebounds from a 40-year low **Professor Li Huifen of the Greater Bay Area Family Office Association** After the Japanese yen failed to break below the 164 level for five consecutive trading days, combined with intervention actions from the U.S. and Japanese governments, the yen began to rise sharply starting Wednesday, reaching the edge of 157 before Friday's close, halting a three-month downward wave. The Bank of Japan maintained the key interest rate at 1%, in line with market expectations. At the same time, regulators explicitly stated for the first time that inflation could rise above the target; if price pressures do not ease, interest rates may be further raised. For the yen, this means that expectations for tightening monetary policy are strengthening, but the pace remains one of the most concerning issues for the market. According to the Financial Times, the U.S. Treasury intervened in the foreign exchange market on Friday, buying yen in cooperation with Japanese authorities to support this currency, which has fallen to nearly a 40-year low. Reports indicate that representatives from the New York Federal Reserve sold euros and bought yen on behalf of the Treasury to execute this intervention. This action closely followed significant intervention measures by Japanese authorities on Thursday. Data from the Bank of Japan shows that Japanese authorities may have sold up to $58.97 billion to buy yen, attempting to curb the yen's continued depreciation. The coordinated actions of the U.S. and Japan mark a significant escalation in efforts to support the yen. The continued weakness of the yen has raised Japan's import costs and intensified domestic inflationary pressures. On the other hand, a stronger yen could also put pressure on Japanese export companies, as the value of overseas earnings converted back to yen would decline. Reports from major banks indicate that the yen's drop to nearly a 40-year low primarily reflects inflationary pressures from the Bank of Japan's loose monetary policy, rather than concerns about Japan's public finance situation, with expectations that the yen and Japanese government bonds will remain under pressure until the end of 2026. Indicators of inflation expectations and the relative steepness of the Japanese yield curve provide a stronger explanation for recent movements of the dollar against the yen and the euro against the yen. Currently, Japan's real policy interest rate is -0.75%, representing a highly accommodative stance, while signs of economic overheating have emerged. Japan's annual wage negotiations have recorded salary increases of over 5% for three consecutive years, and credit growth reached 5.7% in June, the fastest growth rate in over 30 years when excluding the pandemic period. The market expects Japan's overall inflation rate to rise to 2.7% by June 2027, with the core inflation rate rising to 3.1%. If inflation continues to rise, it may ultimately force the Bank of Japan to shift to a more hawkish stance, which would benefit the yen's appreciation and flatten the Japanese yield curve. Low exchange rates and volatility in the bond market have fueled carry trades financed in yen, further increasing selling pressure on the yen. The market has accumulated a large amount of speculative short positions, and this week's coordinated intervention has sharply reversed the direction, as the yen has broken through the resistance level of 158 formed since April. In the short term, the yen will test 155, with a medium-term target level of 152 expected ### Related Stocks - [8301.JP](https://longbridge.com/en/quote/8301.JP.md) ## Related News & Research - [Prospect of further US.-Japan interventions, BOJ rate rises could keep yen supported](https://longbridge.com/en/news/294695452.md) - [ANALYSIS-Japan's fight with yen bears goes on after joint rescue](https://longbridge.com/en/news/294678887.md) - [BREAKINGVIEWS-US-Japan yen team-up worsens BOJ dilemma](https://longbridge.com/en/news/294689392.md) - [BOJ holds rates at 1%, warns of underlying inflation exceeding 2% target](https://longbridge.com/en/news/294450288.md) - [Investors react to BOJ's decision to hold rates](https://longbridge.com/en/news/294450599.md)