Analysis: Effects of joint intervention fade, fundamental pressure on the Japanese Yen remains unresolved

1. About one month after the US and Japan jointly intervened in the foreign exchange market, strategists generally believe that although the joint action curbed the short-term decline of the Japanese yen to some extent, it failed to reverse the fundamental factors driving its long-term weakness.2. During the intervention period, the Japanese yen rebounded against the US dollar from a 40-year low near 164 to 155.23, but the rally gradually faded afterward and is now once again approaching the 160 level.3. The persistently widening interest rate differential between Japan and the US remains the core drag on the yen’s performance. This gap has given rise to numerous “carry trades”—investors borrowing low-cost yen and putting funds into high-yield overseas assets—which continues to put pressure on the yen’s exchange rate.4. In addition, market concerns over Japan’s fiscal situation and rising energy import costs caused by higher oil prices due to Middle East conflicts have further exacerbated the downside risks for the yen.