Yen slips past 160 as hawkish Fed signals offset Japan intervention
Key Takeaways
- •The yen fell to 160.20 per dollar on Friday, its first move back above 160 since the joint intervention by Japan and the United States.
- •Japan spent a record $98.7 billion in coordinated action with the U.S. over the past month to support the currency.
- •Fed Chairman Kevin Warsh’s comments at Jackson Hole lifted Treasury yields and the dollar by signaling that higher rates may still be needed.
- •The 10-year Japanese government bond yield rose to 2.95 percent on Monday, the highest level in 30 years.
- •U.S. Treasury Secretary Scott Bessent said the yen’s moves are well contained and expressed confidence that Bank of Japan Governor Kazuo Ueda will act appropriately on policy.
The yen fell through 160 per dollar for the first time since the record joint intervention by Japan and the United States, highlighting how limited the impact of the $98.7 billion support effort has been against widening interest rate differentials and a more hawkish Federal Reserve tone.
The move came after Fed Chairman Kevin Warsh signaled openness to raising rates at the Jackson Hole economic symposium. Warsh said the Fed must be confident that underlying inflation is moving toward its objective clearly and at sufficient speed, or there remains work to do. His remarks lifted Treasury yields and the dollar, while also pressuring Japanese government bonds.
According to the Wall Street Journal, Japan spent a record $98.7 billion in coordinated action with the US over the past month in an attempt to support the currency. Despite that effort, the yen weakened to 160.20 per dollar on Friday, the first breach of 160 since the intervention. The move underscored how quickly the currency’s earlier stabilization has begun to unwind and how sensitive the yen remains to shifts in US rate expectations.
The pressure extended into Japan’s bond market. The 10-year Japanese government bond yield rose to a fresh 30-year high of 2.95 percent on Monday, tracking the move in US yields. The dollar was last trading at 159.85 yen.
US Treasury Secretary Scott Bessent said the yen’s moves are "pretty well contained" and said he expects Bank of Japan Governor Kazuo Ueda to do the right thing on monetary policy with the backing of Prime Minister Sanae Takaichi, according to the Journal. Bessent’s comments echo earlier remarks expressing confidence in Ueda’s approach, which market participants have viewed as an implicit endorsement of further Japanese rate hikes.
Nomura Research Institute’s Takahide Kiuchi, a former Bank of Japan policy board member, told the Journal that Bessent may use the upcoming Group of 20 finance ministers’ gathering to press Japan to maintain fiscal discipline and pursue further BOJ rate increases in exchange for continued coordinated intervention support.
Kiuchi said curbing yen weakness would help correct broader dollar strength and reduce the US trade deficit. He also noted that rising Japanese long-term yields tied to yen depreciation could spill over into US markets, making yen containment a shared interest for both countries.
