US and BOJ Unleash Volatility Tax on Yen-Funded Leverage
The yen experienced a sharp rise of over 3% on July 30 during New York trading, indicating a possible intervention by Japanese authorities. Analysts estimated that the operation could be around ¥8.45 trillion ($53 billion), although the Bank of Japan (BOJ) has not officially confirmed either the trade or its size.
On July 31, the BOJ held its policy rate at 1% with an 8-1 vote, with Hajime Takata dissenting for an immediate hike. The central bank issued hawkish guidance that further and potentially faster rate increases remain likely, citing the yen's depreciation as an upward risk to inflation.
The U.S. Treasury reportedly used the Federal Reserve Bank of New York to conduct rate checks and alert major dealers to prepare for possible U.S. intervention, representing a major escalation from verbal support to coordinated operational preparation. This readiness signal amplifies Japan's market impact, buying time for the BOJ to execute its projected monetary normalization without forcing immediate, destabilizing rate shocks.