01/05/2026
Traders generally believe that the upward momentum of the yen, driven by government intervention, is likely to fade, and Japanese authorities are highly probable to intervene in the foreign exchange market again to support the yen’s exchange rate.
On Friday, the yen weakened slightly again during the Tokyo trading session. The previous day, the Japanese government intervened by buying yen and selling US dollars, pushing the yen-dollar exchange rate up by 3% at one point. Although Japan’s top foreign exchange official refused to confirm the government’s intervention, a person familiar with the matter revealed that the authorities had entered the market; another person familiar with the matter stated that US economic officials had been informed in advance.
Market participants are worried that if the initial gains of the yen retrace, it may repeat the trend seen in the same period in 2024, when the Japanese government intervened multiple times to address the weak yen. On Friday (on the eve of Japan’s Golden Week holiday from May 4 to 6), Vice Minister of International Affairs of the Japanese Ministry of Finance Atsushi Mimura issued a veiled warning to traders.
“I will not comment on future developments, but I need to point out that we are currently at the beginning of a long holiday,” Mimura said. “We maintain extremely close communication with the United States, and I believe both sides have consistent assessments and follow-up actions regarding the current situation.”
Looking back at 2024, the Japanese government intervened in the foreign exchange market again during the same holiday period. Takeshi Yamamoto, a trader at Sumitomo Mitsui Trust Bank in New York, noted: “Considering the possibility of further intervention by the authorities, they may hope to push the US dollar-yen exchange rate down to the range of 153 to 154 yen.”
In 2024, the yen exchange rate once fell to around 160.17, and Japanese authorities spent approximately 100 billion US dollars multiple times to buy yen to boost the exchange rate; in addition, when the yen fell to 157.99, 161.76, and 159.45 respectively, the authorities also took corresponding intervention measures.
As of 2:00 p.m. Tokyo time, the yen-dollar exchange rate was around 157.25, having hit 155.57 on Thursday, the highest level since late February. During the same period, Brent crude and WTI crude futures prices fell, but it is currently unclear whether there is a connection between the decline in oil prices and the yen’s trend, nor can it be determined if this is the result of Japan’s government intervention in the foreign exchange market. Notably, Japanese officials have repeatedly linked the recent weakness of the yen to speculative activities in the crude oil futures market.
Carol Kong, a strategist at Commonwealth Bank of Australia, said: “The current price movement further confirms the view that 160 yen is the bottom line of Japan’s Ministry of Finance. However, considering the risk of a renewed escalation of the Iran war and the Bank of Japan’s ambiguous attitude towards interest rate hikes, the US dollar-yen exchange rate may rebound soon, which means Thursday’s intervention may only be the first round of actions.”
Although Japanese officials have repeatedly stated that their goal of intervening in the foreign exchange market is to curb excessive exchange rate volatility rather than set a specific exchange rate level, Thursday’s intervention was not triggered by a sudden weakness of the yen. Nevertheless, as the Federal Reserve’s dovish stance has softened and the Bank of Japan is unwilling to commit to a rate hike in June, the yen seems destined to weaken further. The latest intervention measures by Japanese authorities also indicate that their concerns about the continued weakness of the yen are growing—yen weakness may push up import costs and further exacerbate domestic inflationary pressures.
Before the yen’s sudden rebound this time, affected by the decisions of both the Bank of Japan and the Federal Reserve to keep interest rates unchanged this week, the yen-dollar exchange rate once fell below the 160 mark. In addition, the advantage of US interest rates over Japan’s benchmark interest rate has further pushed up the US dollar-yen exchange rate.
Since the settlement date for Thursday’s stock market transactions is set for May 7 (after the Golden Week holiday), the official intervention data from Japan’s Ministry of Finance will not be released until the end of the month. Until then, traders will focus on the financial data to be released by the Bank of Japan later on Friday, in the hope of obtaining early clues about foreign exchange market intervention.
[Disclaimer] Forex trading involves risk; please invest with caution. This content is for informational purposes and objective analysis only, and does not constitute any investment advice, basis for buying/selling, or guarantee of returns. Investors should make independent decisions based on their own financial situation and risk tolerance, and bear their own investment risks.
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