Washington joins the fight for the yen
The desk anticipates a significant moment in the USD/JPY exchange rate following unprecedented joint intervention by the US and Japanese authorities aimed at stabilizing the yen. Per the full note from ING, this intervention marks the first coordinated action by the G7 since 2011 and suggests a shift towards a more assertive FX approach from the US Treasury. A decisive movement to the downside in USD/JPY will likely require continued softness in US economic data and perhaps new initiatives from Japan to repatriate capital. Currently, USD/JPY is trading at 157.0000, with a consensus target of 155.0000 for March 2026 across the market consensus, underscoring the ongoing volatility driving traders' sentiment and positioning.
What the desk is arguing
The desk frames the ongoing USD/JPY dynamic as critical, especially given the newly confirmed joint intervention from US and Japanese authorities. Historically rare, such coordinated action signifies heightened commitment to support the yen and suggests a broader change in intervention tactics. The marks could be particularly notable as the combined market intervention might have already totaled close to $80 billion.
The desk also observes that for USD/JPY to cascade lower effectively, it is contingent on a substantial shift in the US economic landscape, particularly with softening data which could signal a suspension of Fed interest rate hikes. Reports suggest that preliminary intervention included potential purchases of between $5 and $10 billion in yen, although actual execution may be tempered due to limited US forex reserves.
Where it sits in our coverage
Our current spot on USD/JPY stands at 157.0000, with a consensus target of 155.0000, which is defined by a range of 149.0000 to 161.7145. Notably, firms such as deutschebank and goldman set their March 2026 targets at 153.0000 and 155.0000, respectively, while morganstanley is more aggressive, anticipating a lower target of 150.0000.
This positioning aligns with the broader market consensus, where our call sits at the upper end of the ranges set forth, reflecting the underlying volatility and expectations surrounding the yen amid this unprecedented intervention.
How other firms see it
Analysts at firms like deutschebank and goldman are aligned in their perception of the yen's potential resurgence against the dollar. Conversely, morganstanley and rabobank maintain a more cautious stance, expecting longer-term pressures on the yen, with their targets emphasizing weaker yen perspectives.
As the market navigates these interventions, traders should keep an eye on correlations with related pairs like EUR/JPY, especially given shifting risk appetites influenced by US economic data and Federal Reserve actions moving forward. Additionally, upcoming central bank communications could impact these dynamics significantly.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Joint intervention from the US and Japan indicates a more proactive FX policy towards stabilizing the yen.
- 02USD/JPY poised for potential decline but relies heavily on soft US economic data and Japanese capital initiatives.
- 03Current market consensus on USD/JPY targets reflects uncertainty and volatility, with significant divergence amongst firms.
- 04Historical context suggests that this level of intervention is rare, heightening the importance of future US economic data releases.
Market implications
Traders should closely monitor USD/JPY for signs of breakdown or resilience at current levels, especially in light of the latest intervention actions. A break below 157.0000 might trigger a more aggressive move towards the consensus target of 155.0000, thus prompting shifts in positioning across the market.
Risks to this view
A surprising uptick in US economic data could invalidate the current bearish thesis on USD/JPY by reinforcing the Federal Reserve's rate hike trajectory, compelling traders to reassess their positions. Additionally, if Japanese authorities act less aggressively than anticipated or fail to implement new capital repatriation measures, the yen could remain under pressure.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
UBS | Bullish | 1.2000 |
TMGM | Neutral | 1.1450 |
Rabobank | Bearish | 1.1400 |
Articles Washington joins the fight for the yen Published 13:15 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download US and Japanese authorities have confirmed that they have jointly intervened in FX markets to support the yen. Joint intervention is rare and points to new FX activism from the US Treasury. Yet a successful turn lower in USD/JPY will require softer US data, no Fed hikes and possibly some new initiatives from Japan to keep more money at home Chris Turner and Michiel Tukker The US dollar has weakened sharply against the Japanese yen after market intervention Q: What’s happened?
Reports over the weekend suggest US and Japanese authorities have jointly intervened to support the yen. This marks the first coordinated G7 FX intervention since March 2011 following Japan's earthquake and tsunami, and the first joint US-Japan yen-buying intervention since June 1998, when USD/JPY was approaching 150 during the Asian financial crisis. Tokyo appears to have remained an aggressive seller of USD/JPY.
Intervention on Thursday and Friday alone may have totalled close to $80bn, exceeding the scale of operations seen in late April, and further intervention may have been conducted today. On the US side, reports suggest the Federal Reserve was checking rates in EUR/JPY and may have been selling euros against the yen, although it remains unclear whether US authorities have also been directly selling USD/JPY. Questions also remain over the scale of US participation.
Reuters published a photograph of Treasury Secretary Scott Bessent's handwritten notes referencing plans to purchase $5-10bn of yen. In practice, we suspect the amounts deployed may prove smaller. Unlike Japan, the US holds only limited foreign exchange reserves, meaning the signalling effect of intervention is likely to matter more than the volume of flows.
The US holds roughly $38bn of foreign currency reserves, split broadly evenly between the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market Account (SOMA). Around 70% of those reserves are held in euros, with the remainder invested in yen-denominated assets. Q: Why now?
Joint intervention has not come as a complete surprise since the Fed did check the USD/JPY rate back in January. Bessent has been supportive of Japanese intervention for a while and has acknowledged that the yen is very undervalued. Perhaps Washington felt that Tokyo required some help with the heavy-lifting of the yen, since April/May’s $70bn of FX sales had failed to prevent USD/JPY from trading to a new high at 164.
That yen weakness was seen contributing to Japan’s 30% year-on-year increase in import prices and, in turn, weighing on JGBs. Also, in the rates space, the nervousness from investors about Japan has been mounting since the start of the year. The 10Y JGB is trading at the highest yield since the 90s and the momentum is clearly there to move higher still.
Sources & References
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