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A rare joint US-Japan intervention has raised the stakes on traders betting against the yen, but analysts are doubtful speculators will be kept at bay without tighter monetary policy.The ultimate test will be whether the Bank of Japan (BoJ) follows through with faster interest-rate increases, as the wide yield gap with the US remains the main driver of yen weakness.Japan spent $70bn in late April and early May to prop up the yen, but the rebound was brief as was the case in 2024 and 2022, when the country intervened in the currency market alone.But by joining forces to intervene for the first time in 15 years, the authorities in Tokyo and Washington are wagering that a united front will do more to deter speculators than solo intervention has in the past.The yen rose 1% in early Asian trade on Monday to a high of 155.20 per dollar, its strongest in about three months, moving away from the 40-year low of 163.99 it hit in July.The two-year Japanese government bond yield, the one most sensitive to BoJ policy, hit 1.54%, its highest since May 1995, on Monday.Analysts said the coordinated intervention triggered a squeeze in short positions — the largest in nearly two years — and increased the risk of follow-up action, including faster rate hikes from the central bank."A surprise hike by the Bank of Japan would go a long way to reset expectations around the central bank's determination to tighten monetary policy," said Fred Neumann, chief Asia economist at HSBC. "Joint intervention by the US and Japan is a powerful signal to markets... however, without complementary monetary policy adjustments, the impact on the yen from joint intervention is likely to be short-lived."The wild swings in oil prices due to the Iran war and a wide interest rate difference between Japan and major economies have left the yen vulnerable, with speculators amassing net short position on the yen worth about $12.5bn, data showed.Japan and the US confirmed on Monday they conducted coordinated yen-buying intervention last week, a move that underscores the growing unease over the yen's declines."History is quite clear, coordinated intervention packs a punch, and it tends to be successful," said Elias Haddad, global head of markets strategy at BBH in London "It does take time for the trend to ultimately move in the right direction of the intervention."The key difference this time is US Treasury Secretary Scott Bessent has been explicit about concerns regarding yen weakness, lending greater credibility to the prospect of sustainable yen strength, said Carol Lye, portfolio manager at BGIM, a unit of Franklin Templeton.Bessent also said the US would consider increasing in coming months the size of the Federal Reserve's repurchase facility providing temporary dollar liquidity, calling the tool an "important backstop"."The expansion of the Federal Reserve's FIMA repo facility provides Japan with significantly greater intervention capacity, potentially supporting up to 30 additional rounds of intervention at approximately ¥5tn per round," Lye said.Nomura said Japan may have ammo to spend as much as ¥30tn, targeting levels of at least ¥154 to trigger momentum traders. "If this works, could accelerate the move to 150," they said in a note to clients and reviewed by Reuters.Some analysts remain sceptical of the long-term durability of an intervention-led surge in the yen unless there is follow-up from policymakers, with some of the currency's weakness often attributed to the BoJ's cautious approach to raising rates.On Friday, the Japanese central bank warned for the first time that underlying inflation could exceed its target and said future policy discussions would focus on upside price risks, signalling the chance of a rate hike as soon as September.The BoJ's decision came after Japan conducted yen-buying, dollar-selling market intervention in New York markets on Thursday."Unless we see much faster BoJ rate hikes, and the government taking a clearer stand on the JPY as well as dialling back its ambition for fiscal expansion, we still lack confidence in projecting a downtrend for dollar/yen," HSBC currency strategists Joey Chew and Paul Mackel said in a note.For bears, coordinated intervention has not fundamentally altered the yen's outlook but only delayed another test of its lows.Chandresh Jain, EM Asia rates and FX strategist at BNP Paribas, said the yen's bounce provided an opening to initiate a long dollar/yen position through options, betting the yen will weaken in the near term."Basically, we are saying that we should be long dollar/yen, but thinking that it will cap at 163.5," he said."Previously, it was about the velocity of the dollar move. This time it feels like more of a number rather than the velocity," Jain said of the latest bouts of intervention."We have seen multiple times intervention around 160, and then now at 164-ish — so seems like these numbers are getting uncomfortable for them, rather than just the pace which used to be the case historically." 

Japanese Finance Minister Satsuki Katayama will announce Monday that Tokyo and Washington took joint ‌action in the currency market to arrest the yen's slide to 40-year lows, two Japanese ‌government officials told Reuters.Katayama ⁠is likely to stress ‌the two countries' determination to combat what they consider ‌excessive yen declines, said the sources familiar with the matter, on condition of anonymity due to the sensitivity of ⁠the issue.One source, asked if Katayama would announce "joint action", said yes, adding, "The operation is still ongoing."The Ministry of Finance could not immediately be reached for comment on Sunday. US Treasury Department officials did not immediately respond to requests for comment.The expected announcement follows what market sources say were rounds of yen-buying in the market by the Japanese and US authorities, the first joint intervention since 2011, seeking to boost the Japanese currency from its lowest levels against the dollar since 1986.The Japanese government bought yen for ​dollars in New York trading hours on Thursday, a market source told Reuters, with Bank of Japan data suggesting it sold as much as $58.97bn to support the yen.Tokyo's initial intervention came hours before the BoJ decided on Friday to keep monetary policy ‌steady while signalling a strong chance it would ⁠raise interest rates soon. ​A widening rate differential with the US, where the Federal Reserve has dramatically shifted to a ​more hawkish stance, has been a key factor in the dollar's rise against the yen.Shortly after BoJ Governor Kazuo Ueda held a press conference on the central bank's decision, the yen spiked in what markets suspect may have been another bout of yen-buying intervention by Tokyo."Going forward, as the official responsible for currency policy, I would like to respond in close co-ordination with monetary policy," Katayama's top currency diplomat, Atsushi Mimura, told reporters after the yen's spike on Friday, suggesting the MoF and BoJ were working hand in hand to combat the weak yen.Also on Friday, the US Treasury informed a number of banks that it might intervene in the yen market and that they should "stand ready for future action", a source familiar with the matter told Reuters.Treasury ‌Secretary Scott Bessent, who said last week ‌the yen "seems very undervalued to me", had ⁠a notepad at a Friday cabinet meeting with the words "To Do", followed by "Buy Japanese Yen (JPY) $5-10 bill", a Reuters photo showed.In another sign ⁠of bilateral coordination, the MoF made a rare post in English on X that it had "a broad range of tools to address market liquidity needs", including access to the Fed's repurchase facility providing temporary dollar liquidity.The Fed facility, introduced in 2020 to steady markets during the Covid-19 pandemic, allows Japan to raise dollar liquidity without outright sales of US Treasuries, potentially easing funding pressures on Tokyo for intervention.Critics have said Japan could face constraints to continued yen-buying intervention, as selling ​down its huge Treasury holdings to fund such action could trigger a selloff in US debt and cause an unwelcome spike in US yields.Some analysts saw the signs of Japan-US co-operation as driven by Washington's concern over rising Treasury yields, which could worsen if Tokyo failed to prevent a selloff in the yen and Japanese government bonds."Both the US and Japan face risks of inflation turning hot and leaving their central banks behind the curve," former BoJ official Nobuyasu Atago told Reuters. "They see merits in cooperating."Highlighting Japan's concern over rising JGB yields, Economy Minister Minoru Kiuchi said on Sunday the government will step up efforts to enhance communication with markets."It's very important to maintain market trust in ‌Japan's fiscal sustainability," Kiuchi, known as ​a fan of expansionary fiscal and monetary policy, told a television talk programme.

When the US dollar jumps, the rest of the world holds its breath, awaiting the bout of imported inflation that often follows. The sound you hear now, however, may be a collective sigh of relief.The dollar, boosted by rising US ‌rate expectations, is the strongest it has been in over a year against many major rivals, including the euro ​and yen. It's also at multi-year peaks ‌against many emerging market currencies: South Korea's won hit a 17-year low earlier this month.A weak domestic ‌exchange rate raises the cost ⁠of imported goods, materials and inputs, ‌especially dollar-denominated energy and commodities that all countries rely ‌on to varying degrees. But the greenback's inflationary impact is being offset now by a steep slide in global energy prices triggered ⁠by the US-Iran interim peace agreement.This will be a huge relief for policymakers everywhere, particularly in energy-importing countries in Asia that had entered an exchange rate/inflation doom loop. Inflation fears push the currency lower, intensifying price pressures and raising inflation expectations.They may be closer to exiting that loop than they imagined only a few weeks ago.The Iran war-driven energy price spike looks set to disappear as quickly as it arrived.With a 60-day negotiating period for US-Iran peace talks now underway and oil shipments through the Strait of Hormuz picking up again, energy traders feel emboldened to drive prices lower.European natural gas prices are 45% below ​the wartime peak and oil is down 40%, with benchmark Brent crude futures on Tuesday closing at their lowest since hostilities erupted in late February. Brent is below $80 per barrel and falling, while US crude looks poised to test $70 soon.It's a far cry from only a month ago, ‌when oil was well over $100 and talk of $150 ⁠was rife. The upward ​pressure on inflation from expensive energy is fading so fast that oil is close to flipping back to ​being the disinflationary force it was in the year before the Iran war. In fact, the year-on-year change in US crude futures briefly turned negative on Monday.This rapid shift is helping to temper inflation expectations globally, offsetting the impact of a stronger dollar.In Europe, the adjustment is particularly notable.Economists at Nomura and RBC Capital Markets on Tuesday revised their European Central Bank calls, both removing a quarter-point rate hike from their forecasts. Nomura now expects two hikes in the coming months, with RBC calling for just one."There has been a material change in the inflation environment," RBC economists wrote, adding that euro zone inflation dynamics could mean-revert "relatively quickly."That already appears to be happening. Market-based inflation expectations as measured by one-year euro zone inflation swaps have fallen to 2.45% from almost 3.90% a month ago, and the five-year rate has fallen 50 basis ‌points, close to the ECB's 2% target.Similarly, in Britain, ‌the two-year inflation swap rate — a key factor in ⁠fixed-rate mortgage pricing — is back to pre-war levels. UK rate futures markets are now pricing in only one Bank of England rate ⁠hike this year, compared with three a couple of months ⁠ago.With crude prices falling, the pressure on countries to tighten policy further or intervene in the FX market is ebbing, even though the dollar remains strong.Indeed, it may help explain why Japan, which imports 90% of its energy, isn't intervening to support the yen, which is hovering just above a 40-year low near 162 per dollar.That's weaker than levels that have triggered multiple rounds of record yen-buying intervention in the last few years, most recently in April, when the dollar was rising above 160 yen.Crucially, though, Brent crude ​was at its wartime high above $125 a barrel then. Japanese finance minister Satsuki Katayama's latest intervention threats would carry more weight if oil wasn't below $75.Several central banks have acted to cool inflationary pressures. The ECB, Reserve Bank of Australia and Norges Bank have raised rates. Some in emerging economies have taken more drastic action: Bank Indonesia has delivered an emergency rate hike, the Central Bank of Sri Lanka hiked by a whopping 100 basis points in May, and Reserve Bank of India has intervened regularly to support the rupee.But the pressure valve has been released, and policymakers around the world have some much-needed breathing room.The opinions expressed here are those of the author, a columnist for Reuters 

The dollar index fell Tuesday, nearing a four-month low, pressured by a stronger yen after two consecutive sessions of sharp gains.The yen stabilized around the 153–154 per dollar level, with the Japanese currency closing at 154.24 per dollar, some distance away from Friday’s low of 159.23.The euro was steady at $1.1878, having hit a peak of $1.19075 on Monday. Sterling similarly scaled a top of $1.37125 in the previous session and was last bought at $1.3678.The Australian and New Zealand dollars also held on to gains from the previous session and traded at $0.6914 and $0.5970, respectively.Against a basket of currencies, the dollar has fallen more than 1 percent so far in 2026. It was last at 97.05, having hit a four-month low of 96.808 on Monday.

The Japanese yen’s renewed weakness is testing the patience of policymakers in Tokyo and unnerving investors.The currency fell to 154.79 against the dollar on November 12, its lowest level in around nine months, following recent declines largely prompted by the emergence of Sanae Takaichi as Japan’s new leader. Takaichi’s focus on boosting economic growth has fuelled expectations she will be reluctant to prod the Bank of Japan to raise interest rates — a move that would support the yen.If the central bank waits longer to increase borrowing costs, the government may be forced to wade into currency markets to prop up the yen. Officials have indicated they are keeping a close eye on currency market movements, a typical first step before direct intervention.While Japan is committed to international pacts that stipulate markets should determine exchange rates, the Group of 20 has acknowledged that excessive or disorderly currency moves can threaten economic and financial stability, giving members wiggle room to intervene when volatility spikes. Japanese officials insist it is sharp or disorderly movements — not any specific exchange-rate threshold — that trigger intervention.The question now is how far — or how quickly — the yen needs to fall before Tokyo steps in to protect it.Why is the yen’s weakness cause for concern?While the yen’s slide over the past decade or so has transformed Japan into an affordable travel destination for millions of foreign tourists and boosted the profits of the nation’s biggest exporters, its weakness has become acute.For an economy heavily dependent on imported energy and raw materials, the feeble yen drives up costs, fuelling inflation for households and squeezing margins for domestically focused businesses. The resulting cost-of-living crunch has already helped bring down two prime ministers.There’s another reason why Japan’s government may want to act. President Donald Trump has repeatedly criticised Japan for its weak currency, arguing it gives Japanese manufacturers an unfair trade advantage. That’s a point that came up in trade negotiations between the two nations.What is currency intervention?When a country’s central bank steps into the foreign exchange market with the intention of strengthening or weakening its currency, that’s known as direct intervention.In Japan’s case, the Finance Ministry decides when to act and the BOJ carries out the operation via a limited number of commercial banks. Japan will either buy yen or sell dollars to strengthen the local currency or sell yen and buy dollars to weaken it. The scale of the transactions depends on how much impact the ministry seeks and how quickly the market reacts.Where does the money come from?When Japan intervenes to prop up the yen, the dollars typically come from its foreign reserves in the form of cash or US Treasury holdings. As of the end of October, Japan had $1.15tn in foreign currency. During last year’s interventions, for example, Japan appeared to sell some US Treasuries from its reserves to help finance the action.How effective is currency intervention?Intervention is a clear way for the government to tell speculators it won’t allow its currency to go into free fall or rocket up. However, it only offers a temporary fix unless economic fundamentals driving the trend are also addressed. In addition, foreign reserves are generally there to protect the economy in the event of a major financial shock or unexpected event, not to artificially prop up the currency. A unilateral move is still seen as unlikely to turn the tide of currency momentum, but it can buy time until market dynamics change.How often does Japan intervene in its currency market?Japan has exchanged vast amounts of money over the years — usually to weaken the yen. But recent intervention has been in the opposite direction. The government spent a total of almost $100bn on yen-buying to prop up the currency in 2024. On each of the four occasions the exchange rate was around 160 yen per dollar, setting that level as a rough marker for where action might take place again.To keep traders guessing, officials often don’t immediately confirm an intervention. But the ministry discloses the amount spent on intervention at the end of each month. Generating doubt and fear of losses in the market is part of the ministry’s strategy, making the comments of officials highly potent.What is verbal intervention?To keep traders on guard and slow movements in markets, senior officials can make remarks that hint at the prospect of intervention and bloody noses for market players. Comments by the finance minister or the ministry’s top currency official can quickly scare speculators. Officials typically use a carefully calibrated set of expressions to ratchet up their warnings and show how close they are to moving. References to “taking action” suggest intervention is close.What are the flow-on effects of monetary intervention?When Japan’s authorities intervene in currency markets, the immediate impact is typically sharp. Past episodes show the yen jumping around 2 yen against the dollar within seconds and 4 to 5 yen within hours.These abrupt swings can cause huge losses for traders making speculative bets that the currency will keep moving in the previous direction. Sharp moves can also cause headaches for businesses trying to price goods, make payments and hedge against exchange rate fluctuations.For the government, intervention also carries political and diplomatic risks. It can draw criticism for currency manipulation, especially when intervention is aimed at weakening the yen, a direction that can help exporters with trade. That charge is harder to argue when Tokyo acts to support the yen.What is the US stance on a weak yen?Trump accused Japan’s leaders of guiding the yen lower to gain a competitive advantage in early March and said tariffs were the solution. Japan remains on the US Treasury Department’s “monitoring list” for foreign-exchange practices after posting trade and current account surplus against US, but doesn’t fulfil all the conditions to be characterised as a currency manipulator.Tokyo and Washington issued a joint statement in September, in which the two finance chiefs reaffirmed that intervention “should be reserved for dealing with excess volatility or disorderly movements” and not for competitive advantage. Still, Treasury Secretary Scott Bessent on October 7 said Japan’s government needed to give the central bank space to manage volatility — comments seen as a warning against excessive weakness in the yen.Any intervention would take place after prior notice to the US and if it ended up strengthening the yen, it may be tacitly welcomed by the Trump administration.