The U.S. and Japan joined forces to spend nearly $100 billion to intervene in the foreign exchange market and buy yen, but the market believes Bank of Japan (BOJ) that intervention without a rate hike is ineffective, and the yen’s rebound quickly faded.

The Japanese Ministry of Finance has confirmed that it has jointly intervened with the U.S. Treasury Department, spending nearly $100 billion over two days to buy Japanese yen, a record amount, and warned that it would not hesitate to act again if necessary. This marks the first time that the U.S. and Japan have jointly intervened in the foreign exchange market since the Fukushima nuclear disaster in 2011. Following the news, the yen briefly strengthened significantly, but the sustainability of the rebound is questionable, having quickly fallen by over 200 points from its post-intervention high, with USD/JPY closing at 156.99, only a slight increase of 0.3%.

Wall Street analysts generally believe that the core reason for the ineffectiveness of the intervention lies with the Bank of Japan (BOJ). Goldman Sachs economists expect the Bank of Japan (BOJ)'s next rate hike to be in January 2027, which means that the short-term interest rate differential of over 200 basis points between the U.S. and Japan will persist for a long time, and the yen is likely to continue to weaken. Analysts point out that the Bank of Japan (BOJ) is reluctant to raise interest rates because it holds more than half of Japan's government bonds, and a rapid rate hike could trigger a sharp drop in bond prices, leading to the risk of a collapse in the fiscal structure.