Japan may have spent as much as $36.58 billion buying yen on Monday, extending a rare joint intervention with Washington that has pulled USD/JPY back toward 156.70 after the currency's slide to 40-year lows. Bank of America now flags 155 as the pair's next critical level.
Japan may have spent as much as $36.58 billion buying yen on Monday, central bank data indicated, in the latest action to strengthen the currency. The Bank of Japan's projection for money-market conditions points to an 11.4 trillion yen net fund outflow, compared with brokerage forecasts of 5.66 trillion to 6.70 trillion yen. Outsized outflows like this are typically read as a sign of the size of an intervention.
Tokyo and Washington confirm coordinated defense
Japan's finance ministry said Monday that Tokyo and Washington had conducted coordinated yen-buying intervention and would not hesitate to act again, confirming a rare bilateral operation to halt the yen's slide. Speaking Sunday, US Treasury Secretary Scott Bessent said Washington strongly supports Japan's steps to correct the yen's undervaluation and warned the Treasury would not hesitate to join further joint action — the first collaborative US-Japan yen-buying operation in decades, following the currency's plunge beyond 162 yen per dollar in late July.
BOJ data released Friday showed Japan may have sold as much as $58.97 billion to shore up the yen after the currency rose sharply in New York on Thursday. After paring those gains, the yen leapt again late Friday in moves traders suspected were further intervention. The BOJ had held its policy rate at 1% earlier that day.
A widening rate gap behind the slide
The yen's decline has hinged on a widening interest rate differential with the US, where the Federal Reserve has shifted to a more hawkish stance — a gap Japan has struggled to close even as a weaker yen pushes up import prices, stokes inflation, and squeezes household spending power, pressuring Prime Minister Sanae Takaichi's approval rating.
Traders watch 155 for the next move
On Monday, USD/JPY fell 0.4% to trade around 156.70 yen per dollar. The move extended a rally that made July the yen's best month since October, with a 1.6% gain against the dollar.
BofA Securities analysts flagged 155 as a critical level: during earlier intervention episodes this year, USD/JPY found a floor near 155, reinforcing a market view that official defense of the yen was ineffective. A decisive break below that level, the bank said, could unlock corporate dollar-hedging flows that shift trading from dip-buying toward selling into rebounds.
According to BofA Securities strategist Shusuke Yamada: "the ultimate constraint associated with unilateral reserve depletion has effectively been removed", a shift he said makes it harder for speculative investors to challenge the authorities.
Sources: Forex News, Forex News
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