The yen has surrendered nearly half the gains it won from the historic joint US-Japan intervention of July 31, drifting back toward the four-decade low that triggered the operation. Traders say the lack of a "unified voice" among central banks blunted the move, while a separate pitch from Tokyo to boost the currency through fiscal spending has yet to convince markets.
The yen has given up close to half its gains since the US and Japan carried out their first joint currency intervention in nearly three decades, according to investors. The currency bounced from around ¥164 to the dollar in late July to close to ¥155 following the coordinated action, but weakened by 0.7% to ¥158.91 on Monday.
Central banks failed to speak with one voice
Japanese authorities reportedly spent as much as $36.58 billion on the operation, a price tag that has bought only a partial and fading rebound. Traders in futures and options markets continue to hold bearish bets on the yen, though they have reined in position size since the intervention, according to the latest CFTC data.
Investors also point to a lack of coordination behind the move: the European Central Bank was not consulted before the US sold euros to help prop up the yen. According to Van Luu, global head of solutions strategy at Russell Investments: "The effect of the intervention is fading."
BOJ pressure builds
Investors are now watching whether the Bank of Japan bows to market pressure and raises interest rates to support the currency. The central bank's summary of opinions from its July meeting, where it held rates at 1%, showed a growing skew toward an earlier rate increase, Goldman Sachs analysts said. Traders are pricing roughly a 50% probability that the BOJ delivers a quarter-point rate hike at its September meeting.
Tokyo's fiscal pitch meets skepticism
Speaking on Bloomberg Television on August 10, Japan's Growth Strategy Minister Minoru Kiuchi defended the government's spending agenda as a boost for the yen, even as the currency traded around ¥163 to the dollar, its weakest levels in nearly four decades. Prime Minister Sanae Takaichi's government has outlined ¥370 trillion, roughly $2.3 trillion, in public-private investment through 2040, alongside a fiscal year 2026 budget projected to exceed ¥122 trillion. Yet Japan's public debt stands at approximately 209% of GDP as of mid-2025, leaving markets unconvinced the spending push can offset the currency's slide.
Sources: Financial Times, Crypto Briefing, Crypto Briefing
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