US-Japan Intervention Losing Steam as Yen Weakness Persists
Japan and the US coordinated an intervention to stem the yen's slide, but it appears that effort is losing steam. The USD/JPY pair has reversed its downward trend and climbed back above 159 despite warnings of further action from authorities. Westpac notes that this reversal suggests market participants are testing where the tolerance of Japanese and US officials lies.
The bank expects the yen to continue weakening unless additional intervention occurs, but sees a return to levels above 165 as unlikely without significant deterioration in Japan's economic backdrop. Westpac predicts USD/JPY will hold near 160 for the foreseeable future, not expecting a lasting uptrend until US monetary policy expectations shift.
The bank forecasts USD/JPY to reach 154 by end-2027 and 146 by end-2028, still 32 per cent above the 1990 to 2019 30-year average. This would indicate that even a multi-year adjustment lower for the yen would leave it historically weak compared to pre-2020 standards.