Yen Volatility Sparks Intervention Speculation Amid US-Japan Policy Divergence
The yen surged in its sharpest single-day rally since August as traders priced in potential intervention. Market chatter intensified after the New York Fed reportedly quizzed major financial institutions on yen exchange rates—a telltale sign of official discomfort with currency moves.
Cross-Pacific coordination appears unlikely. The US Treasury and Federal Reserve remain publicly at odds, undermining efforts to stabilize forex markets. Treasury Secretary Scott Bessent dismissed talk of joint action, instead attributing yen weakness to Japan's domestic bond turmoil following Prime Minister Takaichi Sanae's snap election call.
Japanese government bonds sold off sharply after Sanae proposed temporary grocery tax cuts, raising deficit concerns. "This isn't about dollar strength," Bessent emphasized, noting how spiking JGB yields destabilized the yen. The remarks come as the TRUMP administration prioritizes suppressing Treasury yields—a goal complicated by dollar appreciation.
