Although authorities generally refrain from immediately confirming currency intervention, they usually issue advance warnings. This is a deliberate strategic ambiguity to preserve the element of surprise to maximize market impact.
Richard A. Brooks | AFP | Getty Images
After issuing multiple warnings against “speculative” and “unilateral” currency movements, Japan’s Ministry of Finance appears to have remained silent and intervened in the yen market during Japan’s Golden Week.
The first intervention reportedly took place on April 30, after the yen weakened above the politically sensitive 160 yen level, marking the first yen-buying operation since July 2024. The yen appreciated by up to 3% on the day, according to LSEG data.
The yen rose sharply again on Wednesday, fueling market speculation that Tokyo had entered the currency market for the second time in recent days. The currency rose from Tuesday’s close of $157.87 to $1 to $155.02, an increase of about 2%.
A strong yen typically hurts the profit margins of Japanese exporters and makes their products less competitive, while a weaker yen raises the cost of energy, food, and raw materials on which the East Asian country relies heavily.
Japan’s Finance Ministry may have spent up to 5.48 trillion yen ($35 billion) on currency support on April 30, just short of the $36.8 billion it last disbursed in July 2024, according to Reuters.
Authorities usually refrain from immediately confirming currency intervention, but usually issue advance warning. This is a deliberate strategic ambiguity to preserve the element of surprise to maximize market impact.
Analysts told CNBC that the timing and scale of the yen’s move could lead to formal action on April 6.
Hirofumi Suzuki, chief foreign exchange strategist and head of research at Sumitomo Mitsui Banking Corporation, said on May 6 that “we observed price movements that suggest intervention,” adding that the authorities are showing their determination to protect the yen, even on a holiday.
Nikos Zaboulas, senior market analyst at trading platform Tradu, said the intervention was timely.
“It is unclear whether such action actually occurred, but the timing is opportune. The impact could be amplified by thin liquidity from the closed Japanese market and the dollar’s already weak position amid renewed expectations of a US-Iran deal,” he said.
Are Japan’s “bazooka” ammunition running out?
But questions remain about the frequency of these interventions and their effectiveness, analysts say.
Frances Tan, chief Asia strategist at Indosuez Wealth Management, said that as of the end of March, Japan held $1.16 trillion in foreign exchange reserves, which would mean it could intervene about 32 more times if it reached the reported $34.5 billion from one intervention.
“So it looks like there’s still some reserves that won’t be a big problem. Japan has enough reserves,” he added.
But just because Tokyo can do that doesn’t mean it will. According to the International Monetary Fund (IMF) classification, Japan has only two more interventions to maintain its free-floating exchange rate status until November.
If authorities continue to intervene frequently in the market, this could lead to repeated interventions and further increased international scrutiny.
Intervening without changing domestic monetary policy is like pressing the brake with your right foot firmly on the gas pedal: at best, your passenger will have a little fun, and at worst, your brake pads will burn out.
jesper cole
Monex Group Expert Director
Japan’s top monetary official, Jun Mimura, told reporters on Thursday that the IMF’s designation of Japan as a floating exchange rate system does not limit the frequency with which the authorities can intervene in foreign exchange markets.
According to the Nikkei Shimbun, US Treasury Secretary Scott Bessent is reportedly scheduled to meet with Japanese Treasury Secretary Satsuki Katayama next week, with currency issues expected to be on the agenda.
While the alleged intervention did give the currency a temporary boost, it does not appear to have reversed the tide in any meaningful way.
After the interference allegations on April 30, the yen briefly appreciated, but began to weaken over the next three sessions.
yen carry trade
Still, analysts questioned whether intervention alone could reverse the yen’s widespread decline.
Analysts said the main pressure on the yen comes from the interest rate differential between the U.S. Federal Reserve and the Bank of Japan, which is driving so-called yen carry trades.
The Bank of Japan’s policy rate is currently 0.75%, while the U.S. federal funds rate is 3.50-3.75%, a difference of up to 300 basis points (bp).
This gap has led investors to “carry over” interest rate differences as profits, borrowing in low-interest currencies such as the Japanese yen, and reinvesting them in high-yield assets denominated in high-yield currencies.
Jesper Coll, a specialist director at Tokyo-based financial services firm Monex Group, said Japan is seeing “relentless” capital outflows from both retail and institutional investors as domestic bond returns are very unattractive.
“The Bank of Japan will continue to be the only central bank that tolerates negative real interest rates, and domestic investors will not tolerate negative returns on their capital at all,” Koll added.
The Bank of Japan pointed out at its April meeting that real interest rates remain significantly low, despite the policy rate of 0.75%.
Rising interest rates are usually accompanied by currency appreciation, so if the Bank of Japan continues to maintain interest rates, the yen is likely to continue to depreciate.
“This highlights the tension between the Bank of Japan’s cautious approach to monetary tightening and the Ministry of Finance’s efforts to stabilize the currency,” said Carlos Casanova, senior economist for Asia at Swiss private bank UBP.
Mr. Coll was clear about the dilemma facing Japanese policymakers.
“Intervening without changing domestic monetary policy would be like pressing the brake with your right foot firmly on the gas; at best, you’ll have a little fun as a passenger; at worst, you’ll burn out your brake pads.”
Central banks are facing a different kind of rebalancing. Raising interest rates to support the yen could put pressure on Japan’s already sluggish economy and push up bond yields, potentially constraining policy for the Bank of Japan.
Japan’s government bond yields are at their highest level in about 30 years. 10 year benchmark It hit a high of 2.537% on April 30th.
Bessent, who is scheduled to meet with Prime Minister Sanae Takaichi during his visit, has so far supported accelerating the Bank of Japan’s rate hikes.
IndoSuez’s Tan said the Bank of Japan needs to continue raising interest rates, even if it is painful for the economy. In fact, the Bank of Japan may plan more hawkish policy as inflation expectations rise, he said.
According to a Bank of Japan survey released in April, more than 83% of respondents expected prices to rise a year from now.
Meanwhile, the Japanese economy narrowly avoided a technical recession in the final quarter of 2025, with the growth rate revised to 0.3% from the previous quarter and 1.3% from the previous year.
