Japan Bets on BOJ Hawkish Turn and US Backing To Defend Yen

Japan is wagering that a hawkish shift at the Bank of Japan and an endorsement from US Treasury Secretary Scott Bessent can give yen-buying intervention extra bite and help slow the embattled currency’s slide. It is a strategy reliant on a small cast of heavyweights - the BoJ, the Japanese finance ministry and Washington - and aimed less at a dramatic turnaround than at raising the cost of betting against the yen.

Governor Kazuo Ueda’s hawkish pivot last month marked an inflection point, bringing the central bank into rare alignment with the MOF and presenting markets with a more unified front as authorities seek to arrest the yen’s decline. Two days after Ueda’s remarks on April 28, the MOF conducted its first yen-buying intervention in nearly two years - a move followed by several bouts of action in May, sources have told Reuters.

Having supposedly spent nearly 10 trillion yen in the current round of interventions, analysts say Tokyo may be counting on Bessent’s visit to Japan next week to deliver an additional jolt, whether through explicit endorsement or carefully chosen words that signal US tolerance for Japan’s actions.

“At this time, it is a significant alignment,” said Bart Wakabayashi, branch manager at State Street in Tokyo, referring to Japanese officials working closely with the US to undercut yen bears. “It is significant, particularly in the fact that Japan is not doing this alone. We’re looking to see if something comes out of these Bessent meetings, but I think even just the appearance that they’re talking about FX levels is important,” he said. Bessent played a key role in propping up the yen in January, when he called for speedier BOJ rate hikes to arrest yen falls and led the US to conduct an unusual rate check.