Japanese Yen knocks to 40-year lows as risks of intervention rise
- USD/JPY clears intervention zone after breaking April swing high.
- Hawkish Fed dots and yields overpower BoJ rate hike.
- Japanese officials warn they remain ready for decisive action.
The Japanese Yen weakens to a nearly 2-year low against the US Dollar as the USD/JPY reaches 161.46, the highest level seen since July 2024's yearly high of 161.99, spurred by a hawkish Fed and the jump of US Treasury yields. At the time of writing, the pair posted solid gains of 0.48%.
USD/JPY weakens as Fed repricing revives intervention fears
The USD/JPY already surpassed the intervention zone after clearing the April 30 swing high of 160.76, in a day when Japanese authorities drove the pair down by 385 pips to end the day at 156.59. Since then, the pair had enjoyed a bounce of over 487 pips to refresh multi-year highs. Worth noting that if the pair clears 162.00, it would refresh nearly 40-year highs, with the next resistance seen at the December 1986 monthly high of 163.36.
Market sentiment has improved following the hawkish tilt by the Fed, which held rates unchanged at around 3.50%-3.75% on Wednesday and hinted that nearly half of the FOMC board expects at least one rate hike in 2026. The new Fed Chair, Kevin Warsh, refrained from expressing his views on monetary policy.
In his press conference, Warsh said that forward guidance is not “well suited” to current economic conditions, though he noted that the jobs market is moving in the right direction and that price stability is the Fed's priority. In the meantime, money markets are expecting at least 34 basis points of tightening towards the end of 2026, according to data from the Chicago Board of Trade (CBOT).
Data from the US showed that Initial Jobless Claims for the week ending June 13 dropped from 230K to 226K, a touch above estimates of 225K, yet still showed an improvement in the labour market.
Alongside the Fed’s policy shift, investors are cheering the US-Iran deal, which usually is a headwind for safe-haven currencies like the Yen. In the meantime, the Japanese Chief Cabinet Secretary Minoru Kihara said, “We are ready to respond appropriately to currency moves as needed at any time.”
Last week, the Finance Minister Satsuki Katayama warned that authorities were “always prepared to take decisive measures.” The top currency diplomat, Atsushi Mimura, has remained mute since early May, around the April 30 intervention.
This week, the Bank of Japan (BoJ) raised interest rates to 1%, yet the Yen failed to gain traction, weighed down by rising US Treasury yields and investors' improving risk appetite.
USD/JPY Price Forecast: Technical outlook
In the daily chart, USD/JPY trades at 161.64, extending its advance above the clustered support formed by the triple simple moving average around 159.09 and the reclaimed trend-line floors near 157.17 and 154.05, which together suggest a firmly bullish near-term bias. The pair is also holding over the horizontal support at 160.00, while the Relative Strength Index (14) at about 71 points to overbought conditions, hinting that upside momentum remains strong but increasingly vulnerable to corrective pullbacks.
On the downside, initial protection is seen at the 160.00 horizontal level, followed by the triple simple moving average around 159.09, where buyers could attempt to reassert control if a dip unfolds. A deeper retracement toward the former trend-line break zones near 157.17 and 154.05 would still keep the broader uptrend intact, but a sustained close below these supports would be needed to undermine the current bullish structure.
(The technical analysis of this story was written with the help of an AI tool.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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