---
title: "The US and Japan jointly intervene in the forex market, with the yen rebounding from a 40-year low."
type: "Topics"
locale: "en"
url: "https://longbridge.com/en/topics/43146708.md"
description: "After failing to break below the 164 level for five consecutive trading days, and with intervention from the US and Japanese governments, the yen surged significantly starting last Wednesday, touching the edge of 157 before Friday's close, ending a three-month downtrend. Last week, the Bank of Japan kept its key interest rate unchanged at 1.0%, in line with market expectations. Meanwhile, regulators explicitly stated for the first time that inflation could rise above target; if price pressures persist, interest rates may be raised further. For the yen, this means expectations for tighter monetary policy are strengthening..."
datetime: "2026-08-03T05:02:45.000Z"
locales:
  - [en](https://longbridge.com/en/topics/43146708.md)
  - [zh-CN](https://longbridge.com/zh-CN/topics/43146708.md)
  - [zh-HK](https://longbridge.com/zh-HK/topics/43146708.md)
author: "[知见观市](https://longbridge.com/en/profiles/2077959360188862464.md)"
---

# The US and Japan jointly intervene in the forex market, with the yen rebounding from a 40-year low.

After failing to break below the 164 level for five consecutive trading days, and in coordination with intervention actions by the US and Japanese governments, the yen surged significantly starting last Wednesday, touching the edge of 157 before Friday's close, ending a three-month downtrend.

Last week, the Bank of Japan kept its key interest rate unchanged at 1.0%, aligning with market expectations. Meanwhile, regulators explicitly stated for the first time that inflation could rise above target levels; if price pressures persist without easing, interest rates may see further hikes. For the yen, this signals strengthening expectations of monetary policy tightening, though the pace remains one of the market's primary concerns.

According to the Financial Times, the US Treasury intervened in the foreign exchange market on Friday by buying yen, collaborating with Japanese authorities to support the currency, which had fallen to a nearly 40-year low. Reports indicate that the New York Federal Reserve Bank executed this intervention on behalf of the Treasury by selling euros and buying yen.

This action followed obvious intervention measures by Japanese authorities on Thursday. Data from the Bank of Japan suggests that Japanese authorities may have sold up to $58.97 billion to buy yen, attempting to curb the currency's continuous depreciation. The coordinated action between the US and Japan marks a significant escalation in efforts to support the yen.

The yen's persistent weakness has increased Japan's import costs and exacerbated domestic inflationary pressures. On the other hand, a stronger yen could also pressure Japanese export companies, as the value of overseas income converted back into yen will decline.

A major bank's report pointed out that the yen's drop to a nearly 40-year low primarily reflects inflationary pressures resulting from the Bank of Japan's (BoJ) loose monetary policy, rather than market concerns about Japan's public fiscal situation. It is expected that both the yen and Japanese government bonds will continue to face pressure until the end of 2026.

Inflation expectation indicators and the relative steepness of Japan's yield curve offer a more compelling explanation for recent USD/JPY and EUR/JPY trends.

Japan's current real policy rate is -0.75%, indicating a highly accommodative stance, while the economy already shows signs of overheating. Annual wage negotiations in Japan have recorded salary increases exceeding 5% for three consecutive years. Credit growth reached 5.7% in June; excluding the pandemic period, this is the fastest growth rate in over 30 years.

Market expectations anticipate that Japan's overall inflation rate will rise to 2.7% by June 2027, with core inflation reaching 3.1%. If inflation continues to climb, it may ultimately force the Bank of Japan to adopt a more hawkish stance, which would favor yen appreciation and flatten Japan's yield curve.

Low exchange rates and bond market volatility have fueled yen-funded carry trades, further increasing selling pressure on the yen. The market has accumulated substantial speculative short positions. Last week's joint intervention sharply reversed this trend, as the yen broke above the 158 resistance level formed since April. In the short term, the yen will test 155, with medium-term prospects pointing toward a target level of 152.

Written by: Professor Li Huifen, Greater Bay Area Family Office Association

(I do not hold any of the above stocks)