Japan and the US are likely to repeat their coordinated current market intervention if the yeh comes under renewed pressure, according to a report by Bloomberg citing comments from former Boan of Japan official Atsushi Takeuchi.
Takeuchi, who previously participated in Japan’s foreign exchange interventions, said the unprecedented joint action by Tokyo and Washington has sent a strong signal that policymakers will not tolerate another sustained slide in the yen.
The intervention followed the currency’s fall to its weakest level in roughly four decades against the US dollar. While the yen has since recovered from those lows, Takeuchi argued that the biggest impact has been psychological, reducing confidence in one-way bearish positioning.
He suggested that the backing of the US gives Japan considerable firepower to defend its currency and has changed market perceptions about the likelihood of future intervention. In his view, speculative investors – including macro hedge funds – are now far less likely to aggressively rebuild short yen positions.
Takeuchi said he expects the yen to trade within a range of approximately 155 to 162 per dollar in the near term. Should the currency remain stronger than the 160 level for an extended period, he believes investors may begin treating that threshold as a new support level, encouraging additional buying.
For hedge funds active in currency markets, the comments reinforce the heightened risks surrounding directional bets against the yen. Takeuchi said that if the currency again begins to weaken materially, Japanese and US authorities would likely conduct another joint intervention, arguing that Washington now has a strong incentive to preserve the credibility established by the recent operation.
Despite the intervention’s success in stabilising markets, Takeuchi cautioned that currency operations alone cannot deliver a sustained appreciation of the yen. He said longer-term gains will depend on the Japanese government’s fiscal stance and whether investors become convinced that policymakers will support, rather than resist, further Bank of Japan interest rate increases.
Recent volatility in Japan’s government bond market has also played a role. Yields on 10-year Japanese government bonds climbed to multi-decade highs after investors interpreted Prime Minister Sanae Takaichi’s economic agenda as signalling increased fiscal spending and potential pressure on monetary policy.
According to Takeuchi, rising Japanese bond yields may also have influenced Washington’s decision to participate in the intervention, as US officials sought to limit the risk that turmoil in Japan’s sovereign debt market could spill over into global bond markets.
