Currency intervention has a unique theatrical, and Japan is the best at it. First come the warnings, which are given in a cautious diplomatic register that all market participants have mastered. “Excessive moves.” “One-sided depreciation.” “We have a free hand.” Then, nobody verifies anything throughout the real procedure. In front of reporters, the finance minister declares that she is “not in a position to comment.” Watching the screens, traders make their own judgments after witnessing the yen rise by two or three percent in a matter of minutes. In late April, the yen fell to ¥160.72 versus the dollar, and Tokyo, according to most estimates, spent around 5.48 trillion yen, or roughly $35 billion, to pull it back.
It was not an accident that it occurred during Golden Week. A big, abrupt buy order has the greatest impact on speculators betting against the currency in thin markets, which are created by the cluster of Japanese national holidays around the end of April and the beginning of May. Even though the nation was closed for the vacation, Finance Minister Satsuki Katayama had made it clear to reporters that ministry representatives would be keeping an eye on the markets. When asked about next measures, she responded, “Golden Week is still ongoing,” which is a statement that conveys more information than it actually does. When the intervention finally arrived, it caught a market that had become a little too accustomed to shorting the yen into a long weekend.
The politics are complicated, but the mechanics are simple. The Bank of Japan is directed to carry out the decision by the Ministry of Finance. The BOJ utilizes the earnings from the sale of some of Japan’s massive foreign exchange reserves, which are mostly liquid dollars and U.S. Treasury bonds, to purchase yen on the open market. When you consider that the global foreign exchange market transfers almost seven trillion dollars every day, Japan’s reserves of over a trillion dollars seem endless. The reserves are enormous. The market is larger. Every trader is aware of this, which is why intervention is effective as a shock tactic but ineffective as a long-term defense.
The interest-rate difference is the deeper issue that cannot be resolved by dollar sales. While the US kept rates at multi-decade highs to combat inflation, Japan kept rates close to zero for years to combat domestic stagnation. Because of this difference, the yen has become the most popular financing currency in the world for carry trades. You can borrow cheaply in yen, invest in dollar assets with higher yields, and keep the spread.
The structural pressure on the yen will continue as long as that difference remains large. The trend may be halted for a few days by intervention. Gravity cannot be reversed. Both Katayama and the chief currency diplomat, Atsushi Mimura, are fully aware of this, which is part of the reason their public declarations consistently have a hint of strategic resignation behind the resolve.
Sanae Takaichi is the name of the political layer that has been making things more difficult. The kind of market expectations that cause a currency to decline have been fueled by the prime minister’s expansionary budgetary policy. The yen fell below 158 for the first time in over a year as rumors surfaced that Takaichi would hold a snap election in February to obtain a mandate for more expenditure. Currency strategists began referring to it as the “Takaichi trade,” a persistent downward pull that the Ministry of Finance is effectively battling against the fiscal posture of its own government, and it operates in the background of every intervention attempt. For any finance minister, that is an uncomfortable position, and Katayama has handled it more diplomatically than the circumstance probably calls for.
As an indication of the change in the global currency system, the American perspective is more cooperative than you might anticipate. U.S. Treasury Secretary Scott Bessent and Katayama have had numerous conversations; in January, Katayama stated that Bessent “shared concerns” on the yen’s one-sided depreciation. A foreign exchange deal between the United States and Japan in September 2025 provides Tokyo what is effectively American permission to step in. That is important.
Although the United States has historically been cautious about its friends manipulating their currencies, an excessively weak yen exacerbates the trade tensions that the Trump administration is already incensed about and causes issues for American exporters. Washington appears happy to allow Tokyo to support the yen for the time being, which eliminates one of the diplomatic barriers that had previously prevented action.
The situation that Japan’s monetary officials are in makes it difficult to avoid feeling some sympathy. They are being asked to protect a currency from factors that are mostly outside of their control, such as US interest rates, an oil shock brought on by the Iran War, the expenditure plans of their own government, and a speculative market that views the yen as a one-way bet.
Every intervention buys a few days of respite, returns the dollar to the 155 level, and then the pressure increases again. Sumitomo Mitsui’s Hirofumi Suzuki described the April operation as proof that the government is “determined to defend the yen, even on a holiday.” That resolve is genuine. The same is true of the pointlessness of fighting a systemic issue on one’s own.