日本外汇干预数据凸显扭转日元疲软之难Japan FX intervention data underscores challenge of reversing weak yen

TOKYO -- The Japanese yen has hovered in a range of around 157 to 158 per dollar for over a month as structural challenges hinder a sustained rise, with new data highlighting the limits of government intervention.

Ministry of Finance figures released on Monday revealed that between July and September, Japanese authorities intervened three times to support the yen, spending a record 15.39 trillion yen ($97.1 billion) in total: 7.97 trillion yen on July 30, 5.55 trillion yen on July 31 and 1.87 trillion yen on Aug. 3.

This marks Japan's largest total amount in a single intervention round. Earlier in the year between April and May, authorities conducted yen-buying interventions that totaled 11.7 trillion yen, bringing the year's total to over 27 trillion yen.

Authorities were prompted to step into the market after the yen weakened to nearly 164 per dollar in July, its lowest level in almost four decades.

Since those interventions, the second of which was conducted jointly with U.S. authorities in the first coordinated effort to support the yen in 28 years, the Japanese currency has stabilized somewhat.

The yen is trading below the 160-per-dollar mark but remains at a relatively weak level. On Monday morning, the Japanese currency was trading 0.3% down against the greenback at around 158.40 yen per dollar.

Investors have grown increasingly cautious following the two rounds of intervention, as well as repeated verbal warnings from Japanese officials. In late August, U.S. Treasury Secretary Scott Bessent also said he believed Japan would take steps to support the yen.

Moves toward the 160-per-dollar level have been met with selling of dollars for yen, helping keep the currency pair in a relatively tight range of around 157 to 158.

The yen has faced selling pressure, partly due to safe-haven flows into the greenback as markets remain cautious about U.S.-Iran relations.

"Japan's vulnerability to the energy crisis continues to present a headwind for the yen," said Matthew Ryan, head of market strategy at Ebury. "Wide U.S.-Japan rate differentials, stretched further by the Fed's hawkish turn, have added to the pressure, as have lingering concerns over Japan's fiscal position." Elevated energy prices stemming from the Middle East conflict have weighed on Japan's trade balance. Higher oil prices pose a challenge because the country relies heavily on commodity imports, meaning it needs to purchase more dollars to pay for higher energy costs. Other structural drivers of yen weakness include yield differentials.

Although Japanese government bond yields have risen significantly, long-term rates have also climbed globally amid growing concerns over inflation and public debt.

The yield on the 10-year JGB sits at around 2.6%. In September, it rose above 3.1%, touching its highest level since 1996. The benchmark 10-year U.S. Treasury yield is hovering below 5%, while the U.K. 10-year gilt yield is at a little over 5.1%.

Such gaps give investors an incentive to shift capital toward higher-yielding foreign assets, weighing on the yen. The outflow of Japanese capital overseas also puts downward pressure on the yen.

Companies are investing abroad in search of stronger growth opportunities as Japan's shrinking population weighs on the domestic outlook, while institutional investors are allocating more capital overseas, where they have access to a broader range of opportunities across private credit, private equity, infrastructure and other asset classes.

Data by the Bank for International Settlements illustrates a downward trend in the yen's real effective exchange rate, which shows its overall strength against various currencies, calculating relative values by considering price fluctuations and trade volume.

The yen remains weaker than major currencies like the dollar and euro, as well as others in Asia such as the South Korean won, Chinese yuan, Philippine peso, Indonesian rupiah and Thai baht.

A potential catalyst for the yen to strengthen could be the Democratic Party's victory in last week's U.S. midterm elections.

With Democrats ending unified Republican Party control of Congress, a divided government with Republican President Donald Trump in the White House could constrain federal spending and put downward pressure on U.S. interest rates, narrowing the U.S.-Japan rate gap.

Growing concerns over data center curbs and the tech selloff across markets may also turn the tide in the yen's favor "From the perspective of U.S. currency policy and the impact that it has on the USD/JPY, developments in the Iran war and crude prices will be a critical factor, in our view," said analysts at Citi Research who argue that Bessent's economic agenda ultimately favors lower U.S. interest rates and a weaker dollar.

But with higher oil prices leading to upside inflation risks, "it would be too risky for the U.S. to abandon its established strong USD policy," according to Citi.

At home in Tokyo, Prime Minister Sanae Takaichi has rolled out an ambitious growth agenda that aims to deploy 370 trillion yen in public-private investments across 17 sectors, including artificial intelligence, in hopes of reversing the capital outflow trend.

But with an investment timeline of by fiscal 2040, the push will likely not lead to a quick reversal in the yen's weakness.

Ebury's Ryan said, "In the near term, we expect USD/JPY to remain confined to a tight range just below the 160 level so long as energy prices stay elevated" and the threat of intervention limits further depreciation.

Looking ahead to 2027, Ryan said the undervalued yen could rally to the 153 range as rate differentials narrow between the U.S. and Japan.

Masahiko Loo, chief fixed income strategist at State Street Investment Management, also sees positives for the yen.

"As the Bank of Japan approaches terminal, sidelined domestic cash should gradually return to JGBs, with insurers and banks rebuilding duration," he said, referring to the eventual end of the BOJ's current rate-tightening cycle.