In a video analysis published on 14 August 2026, FXOpen's Gary Thomson examines why the Japanese yen has weakened again after briefly recovering in the wake of US-Japan currency intervention, with USD/JPY trading back above 159. The pattern is a familiar one: after earlier rounds of yen-buying intervention in 2022 and 2024, the pair likewise drifted back toward its previous levels over subsequent months.

Watch the analysis: Why Has the Yen Weakened After Intervention?

Source: FXOpen Blog

Why the yen recovery faded

The wide interest-rate gap between the United States and Japan continues to weigh on the yen and to support carry trades. That gap has been wide since the US Federal Reserve began raising rates aggressively in 2022 while the Bank of Japan kept its policy rate ultra-low, a setting that has made the yen a standard funding currency for such positions. Carry trades involve borrowing in a low-yielding currency, such as the yen, to fund positions in higher-yielding assets elsewhere, and they tend to persist as long as the rate differential between the two economies remains wide.

Geopolitics and oil

Middle East tensions and higher oil prices are adding pressure on Japan while supporting the dollar. Japan imports the bulk of its energy needs, a long-standing structural feature of its economy, so sustained increases in oil prices weigh on its trade position.

Investment flows

Strong investment activity in the United States, particularly in artificial intelligence, continues to attract capital away from Japan, according to the analysis.

BoJ rate hike expectations

Markets are increasingly pricing in a potential Bank of Japan rate hike in September, but the analysis raises the question of whether a single policy move would be enough to reverse the yen's trend. The Bank of Japan ended negative interest rates in March 2024 and raised its policy rate again in July 2024, but each step left Japanese rates far below US levels, so the differential remained wide.

Intervention watch

With USD/JPY above 159, meaning one US dollar buys more than 159 yen, traders are watching for further action from the Bank of Japan and Japanese authorities. In Japan, foreign-exchange policy is decided by the Ministry of Finance, with intervention carried out through the Bank of Japan. Japan's last yen-buying operations were conducted in 2022 and 2024, and the 2022 episode included rare US participation — Washington's first currency intervention since 2000.

Overall picture

Interest-rate differentials, capital flows, geopolitical risks and the prospect of intervention continue to drive the USD/JPY pair, the analysis concludes.

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