The Japanese yen surges violently by 1.2%! Markets are on high alert—will US-Japan joint intervention occur again?

The Japanese yen has surged sharply against the US dollar, with market participants on high alert and closely watching whether the authorities will intervene in the foreign exchange market again. This volatility occurred as Bank of Japan officials sent hawkish signals and quickly spilled over into the global foreign exchange market.

On Wednesday, the yen rose as much as 1.2% against the US dollar, reaching 158.22, sparking strong speculation of government intervention in the market.

Previously, Hajime Takata—a member of the Bank of Japan’s Policy Board and one of its most hawkish members—suggested that significant and even consecutive rate hikes could not be ruled out, providing fundamental support for the yen’s rally.

This volatility quickly transmitted to the global foreign exchange market, which sees an average daily trading volume of $9.5 trillion. The Bloomberg Dollar Spot Index fell 0.3% in a single day, marking the largest intraday decline since August 21; the emerging market currency index simultaneously climbed to the day’s highs.

Despite the heightened market nerves, this round of yen appreciation remains noticeably smaller than the rally about a month ago. At that time, Tokyo and Washington jointly intervened to support the yen—the scale of which was rarely seen in decades, putting significant pressure on short-sellers.

It was reported that this was the first coordinated yen purchase by the two countries since 1998. After the intervention was triggered, the yen surged about 5% from near a 40-year low of almost 164, with both governments indicating that further joint action would be taken if necessary.

Alex Cohen, a foreign exchange strategist at Bank of America, stated, "The market remains in a highly intervention-aware state."

Monex Inc. foreign exchange trader Andrew Hazlett took a cautious view: "We have heard rumors of intervention, but judging by the scale of the gains, I am skeptical." He added that the yen’s moves against both the US dollar and the euro are "difficult to explain by other factors."

According to data from Japan’s Ministry of Finance, in the past month, Japan has used a record $96.4 billion to support the yen, which had fallen to a 40-year low. Japanese officials have stated multiple times that the core consideration for intervention is the speed and disorderliness of exchange rate fluctuations, rather than any specific exchange rate level.

The yen’s long-term pressure stems from the large interest rate differential between Japan and other major economies, as well as concerns about Japan’s fiscal outlook—partly due to Prime Minister Sanae Takaichi’s aggressive fiscal spending plan.

Meanwhile, after the initial impact of the last intervention gradually faded, hedge funds are rebuilding short positions on the yen. According to US Commodity Futures Trading Commission (CFTC) data, speculative bearish bets are on the rise again.

Amid the ongoing pressure on the yen, it is reported that the Takashi government supports the Bank of Japan raising rates as early as September.

US Treasury Secretary Scott Besant stated that he expects Bank of Japan Governor Kazuo Ueda to "make the right decisions" on monetary policy.

He also characterized recent yen volatility as "fairly manageable" and defended the US position in supporting the yen, noting that extreme volatility in the yen could transmit to higher US interest rates.