Jan 27, 2026
3 min read
The yen rose to 153.31 against the dollar, its highest level since early November, after Prime Minister Sanai Takaichi warned the government was prepared to avoid any "extremely unusual" market movements.
Bloomberg - The yen extended its gains, rising as much as 1.5 percent against the dollar, after comments from Japanese officials fueled speculation that the government may intervene in the market to prevent the currency from reopening.
The yen rose to 153.31 to the dollar, its highest level since early November, after Prime Minister Sanae Takaichi warned the government was ready to avoid "highly abnormal" market moves.It came after signs on Friday that the US could take a rare step towards joining Japan to defend the yen.Japanese stocks fell, with the Nikkei 225 Stock Average closing 1.8% lower, while most bonds rose.
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"It's shaping up to be a controlled and policy-driven rebalancing," said Masahiko Lu, senior fixed income strategist at State Street Investment Management.
Japan will cooperate with the US and act in accordance with the joint agreement reached by finance ministers last September, Cabinet Secretary Minoru Kihara said at a regular meeting on Monday.His words echoed those of Finance Ministry foreign exchange chief Atsushi Mimura, who said Japan and the United States were close, and the two officials declined to talk about the exchange-rate control scandal, a first step before intervention.
"We will take all necessary measures to deal with speculation and really foreign moves," Takaichi said on Sunday, without specifically mentioning the yen, or Japanese government bonds, which have been very volatile recently.
A slightly stronger yen will help curb imported inflation, particularly in the food and energy sectors, which has been a major concern for households.Meanwhile, a slightly weaker dollar will help President Donald Trump's efforts to bolster the manufacturing sector by making American goods cheaper abroad.
Traders said on Friday that the Federal Reserve Bank of New York had contacted financial institutions to monitor the yen exchange rate, as well as close communication between Katayama and Treasury Secretary Scott Bessent, both seen as signs that joint intervention was possible.
Finance Minister Satsuki Katayama insisted on Monday that Japan had the freedom to take necessary measures, including intervention, and said on Monday it was urgently monitoring currency movements.
The currency gained more than 5 yen against the dollar, a surprising reversal from its weakness late last week.It rose nearly 3% in two days of trading, the biggest gain since April, as markets recovered from Trump's tariff attack.
Signs of coordinated policy warnings for currencies and bonds showed that "authorities are not advocating specific levels, but signaling that disorderly, speculative or rash moves could trigger non-linear responses," making one-way positioning significantly less attractive, said Shoki Omori, chief strategist at Mizuho Securities Co. in Tokyo.
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This is likely to reduce short positions in the yen, which has seen its biggest gain in more than a decade.Along with the volatility in the foreign exchange market, Japanese government bonds have also fluctuated.Yields on bonds with the longest maturities hit record highs early last week before retreating.
Japan's 10-year government bonds edged higher on Monday, with the yield down 2 basis points to 2.22%.On Wednesday, the government will sell this 40-year bond in an auction that is expected to be closely watched because the yield at that time exceeded 4% last week.
Here's what Bloomberg strategists say:
La subasta de JGB a 40 años de esta semana parece que se desarrollará sin problemas con la ayuda de un yen más firme, lo que supondrá un gran alivio en todos los mercados de renta fija del G-10. Hace menos de una semana parecía que una venta de deuda superlarga en Japón sería demasiado para los bonos mundiales.
-Mark Cranfield, Markets Live Strategy.
The rise in the yen also imposed pressure on the dollar, leading to gains in some emerging market currencies such as the South Korean won and the Singapore dollar. The dollar fell about 0.4% in New York on Monday, approaching its lowest levels last recorded in 2022, according to Bloomberg indicators.
Concerted interventions to strengthen the yen are rare.For some traders, the concerted actions by both Japan and the United States replicate the Plaza Accord, a 1985 agreement between some of the world's largest economies that effectively devalued the dollar.The debate over the policy response to correct the economic imbalances caused by the "permanent overvaluation of the dollar" has been raging for more than a year.
The United States has only intervened in currency markets on three separate occasions since 1996, according to the New York Fed's website, most recently selling the yen along with other Group of Seven nations to help stabilize trade after the 2011 earthquake in Japan.
Read more: Yen strengthens as Sanae Takaichi warns against official intervention
"Japan cannot peg the yen without risking domestic tensions or global repercussions, so the idea of coordination, a Plaza II-type outcome, is suddenly not far-fetched for some," said Anthony Doyle, investment strategist at Pinnacle Investment Management.
When the US Treasury Department starts making calls, it's usually a sign that it's not a normal currency story.
The Japanese government spent about $100 billion buying the yen to prop up the currency by 2024. In each of the four cases, the yen's exchange rate was around 160 against the dollar, setting that level as a bit of a marker for where it could recover.
“The impact of direct trade is generally temporary when the broader context warrants monetary pressures, as is the case today (and in 2022),” Goldman Sachs strategists including Lexi Kanter wrote Monday.
Any intervention to support the yen would represent a more attractive entry point for shorting the currency, given the persistent headwinds, Michael Sakr, head of multi-asset and currency management at CIBC Asset Management, said on Monday.
The latest move comes as Japan prepares for elections on February 8.Takaichi's promise to cut food taxes has fueled Japan's debt market in recent days.His popularity has plummeted in opinion polls over the weekend, reflecting the risks inherent in his decision to hold early elections.
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