US-Japan Joint Intervention Fades, Yen Returns to 159 Mark Testing Policy Limits

Despite the US-Japan joint intervention in late July that lifted the yen from 163 to 155, high US Treasury yields and rising oil prices have reignited carry trades, with the US-Japan interest rate differential exceeding 180 basis points continuing to pressure the yen. The market widely believes that intervention can only curb speculation and buy time, with 160 viewed as the authorities' political red line. The key to a sustained yen rebound lies in the Bank of Japan accelerating policy normalization and enhancing the attractiveness of domestic assets.