Japan and US to intervene to support yen

Expectations of Japan and the United States re-engaging to support the yen if it continues to decline. A former official at the Bank of Japan confirmed that Japan and the US will coordinate a joint intervention if the yen continues its downward trend. This comes after a rare, joint effort to buy yen in order to halt its sharp decline. The report indicated that the recent intervention was effective in reinforcing market consensus that a continued unilateral decline of the yen is unacceptable, backed by US support that gives Japan almost unlimited capacity to obtain dollars. It is anticipated that the yen could fluctuate between 155 and 162 yen per dollar, with stability above 160 yen per dollar possibly indicating a temporary bottom. There is also a possibility of repeated interventions if the currency's decline resumes. The report emphasized that currency market interventions alone will not produce a sustainable rise unless the Japanese government adjusts its fiscal and monetary policies—particularly given the Bank of Japan's resistance to raising interest rates—while Japanese bond yields have reached their highest levels in 30 years. This, coupled with the deteriorating US financial situation, increases the risk of pressure spilling over into the US bond market.

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