Recent analyses from Commerzbank and MUFG highlight ongoing challenges for the Japanese Yen (JPY) against the US Dollar (USD), with both institutions emphasizing the limited effectiveness of foreign exchange (FX) interventions in the absence of supportive monetary policy. Commerzbank’s Michael Pfister notes that while Japanese authorities have intervened in the FX market to support the Yen, past interventions have yielded mixed results. He points out that the relative success of interventions in July 2024 coincided with the Bank of Japan’s (BoJ) second interest rate hike, suggesting that rate increases are essential for sustained Yen support. Pfister expects two further BoJ hikes and forecasts a decline in USD/JPY over 2026, but warns that if the BoJ fails to tighten policy, the Yen will likely remain under pressure [1].
MUFG’s Derek Halpenny underscores additional headwinds for the Yen, citing rising crude oil prices, higher global yields, and Middle East tensions as factors undermining Yen stability and counteracting recent Ministry of Finance (MoF) interventions. Halpenny observes that Japanese Government Bonds are underperforming and real yields remain too low, especially as inflation rises. He notes that the USD/JPY has surpassed the 158-level, which marked the last MoF intervention on May 6, and is approaching the highs seen on April 30, when intervention first took place (with both interventions pending confirmation). Halpenny suggests that, given these conditions, further FX intervention by the MoF or BoJ may be necessary to prevent another sharp move higher in USD/JPY [2].
Both sources agree that interventions alone are insufficient to stabilize the Yen. Commerzbank stresses the need for additional BoJ rate hikes to ensure intervention success, while MUFG highlights external pressures—such as global yields and oil prices—that are beyond Japan’s control and continue to weigh on the currency. The consensus is that without a shift in monetary policy, the Yen’s outlook remains challenging, and further interventions may be required to stem its weakness [1][2].
CONCLUSION
Both Commerzbank and MUFG emphasize that FX interventions, without the backing of higher interest rates from the Bank of Japan, are unlikely to provide lasting support for the Japanese Yen. With external pressures mounting and real yields remaining low, the Yen is expected to stay under pressure unless the BoJ implements further rate hikes. Market participants should monitor BoJ policy decisions closely, as they will be pivotal for the Yen’s trajectory.