Global Market: Japan bets on BOJ hawkish turn, US backing to defend Yen

Japan is mounting a coordinated effort to slow the Yen’s decline, banking on a more hawkish stance from the Bank of Japan and support from U.S. Treasury Secretary Scott Bessent to make currency intervention more effective, according to a Reuters report.

The strategy hinges on a rare alignment between the BOJ, Japan’s Finance Ministry and Washington, with policymakers seeking to raise the risks for traders betting against the Japanese currency rather than engineer a sharp reversal in the yen’s trajector.

The shift gathered momentum after BOJ Governor Kazuo Ueda adopted a more hawkish tone on April 28, highlighting inflation risks linked to the weak yen. The comments helped align the central bank more closely with the Finance Ministry’s efforts to stabilise the currency.


Just two days after Ueda’s remarks, Japan’s Finance Ministry carried out its first yen-buying intervention in nearly two years, Reuters reported, adding that authorities are believed to have intervened multiple times in May as well. Analysts estimate Tokyo may have spent close to 10 trillion yen, or roughly $63.7 billion, in the latest round of market operations.

Japanese officials are now looking toward Bessent’s upcoming visit to Tokyo as another potential support factor for the yen. Investors believe even subtle signals from Washington indicating tolerance for Japan’s intervention efforts could discourage aggressive yen-selling.

That Bessent had already played a role in supporting the yen earlier this year when he publicly advocated faster BOJ rate hikes and oversaw an unusual U.S. rate check in January, which markets interpreted as a possible precursor to coordinated intervention.

During his three-day trip, Bessent is expected to meet Japanese Finance Minister Satsuki Katayama, Prime Minister Sanae Takaichi and potentially BOJ Governor Ueda, Reuters reported.

Japan’s top currency diplomat Atsushi Mimura said Tokyo remains in close communication with U.S. authorities, Reuters reported, adding that American counterparts fully understand Japan’s position and policy actions.

Attention is also shifting back to the BOJ ahead of its June 15-16 policy meeting. Markets are closely watching speeches from senior BOJ officials for indications that last month’s hawkish rhetoric could translate into an actual rate hike.

Investors are debating whether the BOJ will raise interest rates to 1.0% from 0.75% at the June meeting. Ueda’s focus on inflationary risks from yen weakness has kept the possibility of a June hike alive, unlike previous episodes when dovish messaging accelerated yen selling.

Deputy Governor Ryozo Himino and board members Kazuyuki Masu and Junko Koeda are also scheduled to speak later this month, with markets expected to scrutinise their comments for further clues on monetary policy direction.

Internal divisions remain within the BOJ board. While the central bank kept rates unchanged in April, three of the nine board members dissented and supported a rate hike to 1.0%.

Political considerations may complicate the BOJ’s tightening path. Prime Minister Takaichi has historically favoured loose monetary policy and has previously resisted tighter financial conditions. At the same time, rising living costs driven by the weak yen are increasing pressure on the government to support the currency.

External factors are also weighing heavily on the yen. Analysts told Reuters that Japan’s dependence on energy imports has made the economy vulnerable to higher oil prices triggered by the Iran conflict, which worsens the trade deficit and adds downward pressure on the currency.

Even so, market participants believe Japan’s renewed intervention efforts, combined with firmer policy signals from the BOJ and tacit support from Washington, may help slow speculative attacks on the yen and reduce the risk of a disorderly depreciation.