Yen Rallies to 155 as US-Japan Joint Intervention Tests Carry Trades

The yen's surge past ¥155 per dollar after the first US-Japan joint currency intervention in 15 years tests whether the rally can hold.

The yen strengthened to ¥155 per dollar Monday, its highest in three months, after Washington and Tokyo confirmed a rare coordinated intervention that pushed the currency up nearly 4 percent last week.

"There is a significant accumulation of yen sell positions," said Jonas Golterman, chief market economist at Capital Economics. "While the scale may be smaller, there is a possibility of a yen carry trade unwinding similar to the summer of 2024."

Japan's Ministry of Finance and the Bank of Japan deployed an estimated ¥6 trillion to ¥7 trillion on July 30 alone, with additional intervention on July 31 bringing the two-day total to at least ¥10 trillion. The US Treasury Department, through the Federal Reserve Bank of New York, sold euros and purchased yen on July 31 — the first coordinated yen-buying operation by Washington and Tokyo since 1998. A photograph of Treasury Secretary Scott Bessent's notebook from a cabinet meeting showed a "to do" list including "Buy JPY $5 billion to $10 billion."

The stakes extend well beyond Japan. Global hedge funds held 124,575 contracts worth approximately $9.5 billion betting on yen weakness as of July 28, near record levels since 2007. If the yen's appreciation continues, the unwinding of yen carry trades — where investors borrow cheaply in yen to buy higher-yielding assets — could trigger volatility across Asian and US equity markets, echoing the August 2024 selloff.

Why Washington Joined Tokyo

The US participation marks a significant shift in policy posture. Trump told reporters Sunday: "They have a weakening yen, and they wanted a little bit of help. And we're always there for Japan." Bessent said Washington "will not hesitate to participate in further joint intervention," while repeating calls for additional rate increases from the Bank of Japan.

The US has its own incentives. A persistently strong dollar has eroded export competitiveness for American manufacturers, and officials worried that Japan's unilateral intervention could force Tokyo to sell large quantities of US Treasury bonds to raise funds — potentially pushing long-term US yields higher. The last time the US and Japan coordinated to prevent yen depreciation was 1998, when the currency traded near ¥147 per dollar.

The intervention also reflects a structural shift in how the two governments approach currency policy. Japan traditionally acted alone in defending the yen, but the scale of the depreciation — the currency fell to nearly ¥164 per dollar, its weakest since 1986 — made unilateral action insufficient. The US decision to participate, using euros rather than dollars to avoid directly weakening its own currency, signals a coordinated approach to managing global FX imbalances.

The 155 Threshold and What Comes Next

The 155 level carries significance beyond standard technicals. It was a key defense line during Japan's intervention between April and May, and strategists including Englander view it as the next key test for whether the yen's rally can sustain its strength. The yen has already surpassed its 200-day moving average of ¥158, and the Nikkei reports that Japanese import companies' expected exchange rate range of ¥155-160 makes this the next battleground.

The Bank of Japan raised rates to 1 percent — a 31-year high — but Oxford Economics expects the central bank to wait until December for the next hike. "Despite rising market speculation about faster rate hikes by the Bank of Japan, we continue to assume the central bank waits until December because the intervention reduces the risk of a sharp yen depreciation and gives the BoJ more time to assess the impact of the Middle East conflict and past rate hikes on the economy," the consultancy said.

The IMF counts interventions conducted within three business days as a single instance, which is why market participants expect additional action on Monday to maximize the impact. If the yen breaks decisively below ¥155, the carry trade unwind could accelerate, hitting overvalued tech stocks where these positions are concentrated. Analysts at Capital Economics and Oxford Economics both caution that intervention alone does not reverse the underlying rate differential that drove the yen lower, meaning the BoJ's policy path remains the ultimate determinant of the currency's trajectory.

This article is for informational purposes only and does not constitute investment advice.