Japan FX: Why no second round of intervention as yet?

Research evidence excerpt

Japan FX: Why no second round of intervention as yet?

Japan FX

25 June 2026 Citi Research

Economic policy of Takaichi government and relevant issues

Given her reflationary penchant, PM Takaichi may in fact have felt little opposition

to JPY weakness.

The mechanism by which JPY weakness fuels rises in Japanese interest rates would

likely be highly undesirable for the Takaichi government given its priority on

cooperative investment by the public and private sectors in strategic areas. Even

so, the fact that the recent rise in long-term interest rates has been relatively

orderly despite marked yen weakness may well cause the government to

downgrade the priority on its policy to defend the JPY (Figure 2).

Overall market environment

The fact that Japanese equities remained strong when the JPY appreciated on FX

intervention two months ago should have been encouraging for the Takaichi

government and the MoF. However, we would not be surprised if the government is

becoming more cautious regarding decisions on intervention policy now that the

US and Japanese equities are growing more unstable.

If intervention by the Japanese government has negative impacts on US interest

rates and equities, it would negatively impact coordinated efforts with the US

authorities led by Treasury Secretary Bessent, who watches market conditions

closely.

Currently the USD is strong overall (especially against the EUR) amidst a risk-off

mood, while JPY weakness does not stand out. This may also complicate decisions

on FX interventions by the Japanese authorities.

Figure 1. IMF Exchange Rate Classification (2023) Figure 2. USDJPY and 10y JGB yield

25.0 1.0

Monetary

framework policy Inflation-targeting aggregateMonetary Others (%) (%)

20.0 0.8

Australia Norway Mexico US