Intervention-Led Yen Buying Recorded Over Three Weeks

The USD/JPY pair held a narrow range in the North American afternoon session, last trading around 159.08826, edging slightly higher on the day. Earlier, the pair fluctuated within a range of 158.50 to just below 159.50, suggesting that after the historic joint intervention three weeks ago, bulls and bears are engaged in fierce competition around the 160 level.

**Intervention effect shifts from impulsive appreciation to digestion phase**

Three weeks ago, the U.S. and Japan conducted their first joint "yen-buying" intervention in 15 years, and the first in 28 years, briefly surging the yen from near 164, a nearly 40-year low, to around 155. However, the impulsive appreciation effect from the intervention is being gradually digested by the market. According to market reports, just three days after the intervention, the yen faced notable selling pressure after spiking to 155.20, with wide swings between 155.2 and 157.8 throughout the day, officially kicking off a tug-of-war between bulls and bears. With the pair now back above 159, it indicates that the massive U.S.-Japan yield differential remains the core force driving the trend.

**Yield differentials and policy divergence pose fundamental pressure**

The fundamental reason for the yen's sustained weakness lies in the significant divergence in U.S. and Japanese monetary policies. According to reports, Japan's policy rate stands at just 1% after the June rate hike, while the Federal Reserve's benchmark rate remains at a high of 3.5% to 3.75%. This massive yield gap continues to support the dollar and attracts carry trades shorting the yen. Although U.S. Treasury Secretary Bessent previously stated he would "not hesitate to participate in further intervention," verbal warnings have limited power to reverse the trend until translated into concrete action.

**Market sentiment sways between official resolve and reality**

Japanese Finance Ministry's Vice Minister of Finance for International Affairs Atsushi Mimura once described the cooperation as the "completed form of the Japan-U.S. monetary alliance," underscoring both sides' resolve to stabilize exchange rates. The total scale of this intervention is estimated at approximately ¥8.45 trillion. However, the intervention has also been accompanied by noise, such as former U.S. President Trump's remark that the intervention was "to make money," raising doubts about the purity of the joint action. Currently, the pair's tug-of-war near 159 reflects traders weighing the resolve of official intervention against the overwhelming reality of yield differentials.