The USD/JPY currency pair stabilized around 156.61 after a sharp intraday slump on Thursday, which was triggered by warnings of possible intervention from Japanese authorities. The pair had earlier hit an intraday low of 155.56, marking its lowest level since February 27, and was down approximately 2.4% on the day [1]. According to a Nikkei report cited by Reuters, Japanese authorities may have intervened in the foreign exchange market by buying Yen and selling Dollars, although there has been no official confirmation of such action. This follows comments from Japan Finance Minister Satsuki Katayama, who stated that authorities are 'getting closer to taking decisive steps' in the FX market [1].
The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, was trading around 98.28, down nearly 0.68%. Ongoing tensions in the Middle East were noted as a factor that could limit further losses in the US Dollar [1]. On the US economic front, the latest data showed the economy expanded at an annualized rate of 2% in the first quarter of 2026, up from 0.5% in the previous quarter but below market expectations of 2.3%, according to a preliminary estimate. The Personal Consumption Expenditure (PCE) price index rose 0.7% month-on-month in March, accelerating from 0.4% in February and marking the strongest gain since June 2022. The core PCE index, the Federal Reserve’s preferred inflation gauge, increased by 0.3% month-on-month, easing slightly from 0.4% in February and matching forecasts [1].
These data points support the view that the Federal Reserve may keep interest rates higher for longer as policymakers assess the impact of the US-Iran war on the economy. Fed Chair Jerome Powell stated after Wednesday’s monetary policy decision that the current policy stance is 'well positioned' for a wait-and-see approach [1].
Looking forward, the USD/JPY is expected to remain highly sensitive to developments from Tokyo, with traders also monitoring Middle East tensions and the reopening of the Strait of Hormuz, as elevated oil prices continue to pose a near-term headwind for the Japanese Yen. Technical analysis indicates a bearish near-term bias for USD/JPY, with the pair slipping below the 50-day and 100-day Simple Moving Averages, weakening momentum, and downside signals from both the RSI and MACD indicators [1].
CONCLUSION
The USD/JPY experienced a significant drop amid suspected intervention by Japanese authorities, with the pair stabilizing but maintaining a bearish outlook. Market participants are closely watching for further official action from Tokyo and monitoring geopolitical developments, as these factors are likely to drive near-term volatility in the currency pair.