Bessent's Intervention Boosts Yen Appreciation Prospects

U.S. Treasury Secretary Scott Bessent's backing of the recent yen-buying intervention has analysts at ING predicting a lasting appreciation for the currency.

The joint exercise with Japan was seen as a success by ING, which noted that Bessent's confidence in the intervention stems from his conviction that the yen is undervalued and expectations of yen-supportive policy shifts in Japan, including faster Bank of Japan rate hikes.

ING's Behavioural Equilibrium Exchange Rate model has shown overvaluation above 20% for the yen throughout 2026, indicating that it is around 20% undervalued against the dollar. Markets are pricing a roughly 75% chance of a BOJ hike in September.

The intervention may have committed significant political capital to its success, as seen with Sweden's Riksbank and Mexico's Banxico signalling shifts in currency trends through hedging their FX reserves or unwinding short positions.

ING Global Head of Markets Chris Turner cited Tokyo's new growth strategy, announced in July, which aims to deploy 370 trillion yen ($2.3 trillion) of public-private investment by 2040 as a key factor in durable yen appreciation.