Japanese Yen rallies to over two-month high vs. weaker USD on intervention fears

FXStreetJan 26, 2026 2:58 AM

Japanese Yen kicks off the new week on a stronger note amid rising intervention fears.
Takaichi warned against speculative moves following a rate check from Japan’s MOF.
The divergent BoJ-Fed outlooks and sustained USD selling further weigh on USD/JPY.

The Japanese Yen (JPY) builds on Friday's humongous gains against a broadly weaker US Dollar (USD) and opens with a bullish gap at the start of a new week, hitting its highest level since November 14 during the Asian session. Japan's Prime Minister Sanae Takaichi warned against speculative moves on Sunday following rate checks from Japan’s Ministry of Finance and the New York Federal Reserve (Fed) on Friday. This heightens the chance of joint US-Japan intervention to stem any further JPY weakness and provides a strong boost on Monday.

Apart from this, the Bank of Japan's (BoJ) hawkish outlook and persistent geopolitical uncertainties turn out to be other factors underpinning the safe-haven JPY. The USD, on the other hand, dives to its lowest level since September 2025 on the back of the so-called 'Sell America' trade and bets that the US central bank would lower borrowing costs two more times this year. The divergent BoJ-Fed expectations contribute to the USD/JPY pair's intraday slump to sub-154.00 levels and back the case for a further depreciating move.

Japanese Yen bulls seize control as Takaichi’s remarks fuel intervention speculation

Japanese Prime Minister Sanae Takaichi warned on Sunday that officials stand ready to take necessary steps against speculative and highly abnormal market moves. This comes on top of market chatter that the New York Federal Reserve conducted rate checks on the USD/JPY pair around midday on ‌Friday, following a similar call from Japan’s Ministry of Finance. This suggests that authorities may be preparing to intervene in the currency market.
The Bank of Japan, as expected, maintained short-term interest rates at 0.75% by an 8-1 vote at the end of a two-day meeting on Friday. Moreover, the central bank raised its economic and inflation forecasts, and signaled its readiness to continue hiking still-low borrowing costs. This further contributes to the Japanese Yen's outperformance against its American counterpart and drags the USD/JPY pair to its lowest level since November 14.
US President Donald Trump's tariff threats to gain control of Greenland, along with a standoff with European allies, raised doubts about the long-standing NATO alliances and led to the loss of trust in global leadership. This, in turn, revives the so-called 'Sell America' trade and weighs heavily on the US Dollar amid expectations for more policy easing by the US central bank, which marks a significant divergence in comparison to the BoJ's hawkish tilt.
Traders now look forward to the release of the US Durable Goods Orders data for short-term opportunities later during the North American session on Monday. The focus, however, will remain glued to the highly anticipated FOMC policy meeting, starting on Tuesday. Investors will look for more cues about the Fed's rate-cut path, which will play a key role in influencing the USD price dynamics and determining the near-term trajectory for the USD/JPY pair.

USD/JPY looks to extend downward trajectory below 154.00 pivotal support

From a technical perspective, a sustained break and acceptance below the 154.00 horizontal support, also nearing the 100-day Simple Moving Average (SMA), will be seen as a fresh trigger for the USD/JPY bears. Momentum has deteriorated as the Moving Average Convergence Divergence (MACD) slips below the zero line and extends lower, hinting at building bearish pressure.

The Relative Strength Index (RSI) sits at 32, near oversold, suggesting downside momentum is stretched, and a bounce could develop if buyers defend the 100-day SMA. A daily close below that support would risk a deeper pullback, while stabilization above it would keep the broader bullish structure in place.

(The technical analysis of this story was written with the help of an AI tool.)

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

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