Joint Intervention Lifts Yen, But Sustained Recovery Requires Faster BoJ Normalization

The Japanese Yen has been subject to joint intervention by Japan and the US, leading to a modest weakening in Asia. The USD/JPY pair is now near its 200-day moving average around 158.00 after recent market fluctuations.

According to MUFG's Lee Hardman, Japan is estimated to have bought close to $87 billion of Yen, while US participation is smaller but symbolically important. However, MUFG expects US intervention to remain limited and stresses that fundamental changes are needed for a sustained Yen recovery.

Joint action has indeed provided some support to the yen in the near-term, but analysts believe it can only buy time. A more significant reversal of the yen's weakening trend will require fundamental changes, including faster BoJ normalization. More US pressure on Japan to allow a faster pace of policy normalization as part of the joint intervention arrangement would be an important step.