{"id":73173,"date":"2026-08-13T00:42:07","date_gmt":"2026-08-13T00:42:07","guid":{"rendered":"https:\/\/www.europesays.com\/japan\/73173\/"},"modified":"2026-08-13T00:42:07","modified_gmt":"2026-08-13T00:42:07","slug":"yen-sinks-as-us-japan-intervention-unravels-2","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/japan\/73173\/","title":{"rendered":"Yen sinks as US-Japan intervention unravels"},"content":{"rendered":"

The Japanese yen has suffered its sharpest sell-off since February as an American attempt to prop up the ailing currency unravels.<\/p>\n

The yen fell by as much as 1pc to 159 to the dollar on Monday, wiping out around half of its gains since last week, when the US treasury bought the currency<\/a> for the first time in 15 years.<\/p>\n

Japan\u2019s currency dropped to a 40-year low in July amid a wide discrepancy in interest rates between the two countries, with rates far higher in the US.<\/p>\n

The decline will add to pressure on the Bank of Japan to raise interest rates to support its currency. It has also raised questions among investors about whether Donald Trump\u2019s administration will be forced to intervene for a second time to bolster the yen.<\/p>\n

The latest fall will ring alarm bells in the US that its Asian ally could sell off its substantial holdings of American debt to further prop up the yen.<\/p>\n

Such a move would push up the cost of US government borrowing, which is already under strain from the US\u2019s $40tn (\u00a330tn) debt burden.<\/p>\n

Seth Carpenter, the chief global economist at Morgan Stanley, said: \u201cThe US-Japan intervention<\/a> does not change our outlook on the fundamental drivers of the yen.\u201d<\/p>\n

The yen has fallen despite the Bank of Japan raising interest rates in recent years.<\/p>\n

Rates have risen from negative 0.1pc in 2024 to 1pc today as the world\u2019s fourth-largest economy reflates after decades of malaise since the early 1990s.<\/p>\n

However, rates remain well below levels in the US, where the Federal Reserve\u2019s funds rate sits in a range of 3.5pc to 3.75pc.<\/p>\n

The Japanese government confirmed last week that it had taken action with the US to boost the yen<\/a> and counteract \u201cexcessive volatility and disorderly movements in recent months\u201d.<\/p>\n

The intervention triggered a sharp spike in the value of the currency as traders betting on declines in the currency were forced to recalibrate their positions.<\/p>\n

In a statement last week Scott Bessent, the US treasury secretary, said the White House would \u201cstrongly support Japan\u2019s decisive market and monetary steps to correct the substantial undervaluation of the yen\u201d.<\/p>\n

He said: \u201cThe Takaichi government is moving into an exciting new phase of Abenomics, as nearly 15 years of powerful stimulus have created durable, robust underlying economic dynamics.\u201d<\/p>\n

Speculators cut \u200ctheir bets on declines in the Japanese yen by the most in more than 12 years, according to data from the Commodity Futures Trading Commission released on Friday.<\/p>\n

Claudio Irigoyen, a global economist at Bank of America, warned the intervention would raise pressure on the Bank of Japan to raise rates further.<\/p>\n

He said: \u201cForeign currency intervention is generally ineffective unless imbalances are addressed.<\/p>\n

\u201cCoordinated intervention raises the need for credible policy follow-through in Japan to stabilise the yen.<\/p>\n

\u201cThe Bank of Japan will likely be under high pressure if the Fed hikes in September, in our view.\u201d<\/p>\n

Mohamed El-Erian, the chief economic adviser at Allianz, said on Monday: \u201cThe yen has been weakening gradually since the large joint Japan\u2013US FX intervention, a sharp reminder that the key to fixing a currency \u2018mispricing\u2019 is getting the policy mix right.<\/p>\n

\u201cThe longer Japan delays in doing so, the more elusive the goal of this historic intervention becomes.\u201d<\/p>\n

Markets are pricing a 60pc probability that policymakers at the Bank of Japan will vote to increase interest rates by 0.25 percentage points to 1.25pc at its next meeting in September.<\/p>\n

Neil Shearing, chief economist at Capital Economics, warned that the decline in the yen alongside rising government costs in Japan showed that investors are becoming less confident about the government\u2019s spending plans.<\/p>\n

He added: \u201cMarkets have become concerned that the government\u2019s rhetoric points to a less disciplined fiscal regime in future.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The Japanese yen has suffered its sharpest sell-off since February as an American attempt to prop up the…\n","protected":false},"author":2,"featured_media":73174,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[174],"tags":[217,1105,191,189,1106,8,188,190,1043,8987,44350],"class_list":["post-73173","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-currency","tag-economy","tag-economy-of-japan","tag-global-economy","tag-japan","tag-japans-economy","tag-japanese-economy","tag-standard","tag-us-federal-reserve","tag-us-treasuries"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/posts\/73173","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/comments?post=73173"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/posts\/73173\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/media\/73174"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/media?parent=73173"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/categories?post=73173"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/japan\/wp-json\/wp\/v2\/tags?post=73173"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}