US, Japan, and South Korea Join Forces to Support Yen. Forecast as of 03.08.2026
Over the past few weeks, the USD/JPY pair has been trading amid concerns about potential currency interventions. Eventually, the Forex market saw them happen. The coordinated intervention was meant to further temper speculators. Let’s discuss this topic and develop a trading plan.
The article covers the following subjects:
Major Takeaways
- The yen was supported by a coordinated intervention.
- The Bank of Japan’s sluggish response is helping the USD/JPY.
- The US does not want to allow Treasury yields to rise.
- Long positions can be considered as long as the USD/JPY remains above 156.
Weekly Fundamental Forecast for Yen
The first coordinated currency intervention since 1998 aimed at supporting the yen has raised many questions. Is Japan truly so vulnerable that it cannot counter USD/JPY bulls on its own? Why would the US support such an effort? Which other countries, if any, were involved? Finally, why did the euro become a target for selling pressure rather than the US dollar alone?
According to Bloomberg, around $53 billion was deployed on the first day of intervention. Since September 2022, Japan has spent approximately $255 billion on currency interventions. With foreign exchange reserves exceeding $1 trillion, Tokyo theoretically had sufficient resources to act independently. However, a significant portion of those reserves is invested in US Treasury securities. Selling these assets aggressively would push Treasury yields higher—an outcome that does not align with US policy objectives.
US and Japanese Bond Yields
Source: Bloomberg.
According to Mizuho Bank, it was precisely the Ministry of Finance—led by Scott Bessent—that did not want volatility in Japan’s debt market to continue negatively affecting the US debt market, and this was the main reason for US participation in the coordinated intervention.
Why was the euro chosen as the target? The answer may be simpler than attempts to link it to the concept of a strong dollar. According to JPMorgan, the US Treasury’s Exchange Stabilization Fund held assets of approximately $13 billion and €25 billion. While this amount alone would clearly be insufficient for a large-scale intervention, the combined resources of Japan and a potential third participant could have provided a more substantial firepower. Against this backdrop, the FX market speculates that South Korea may also have taken part in the coordinated currency intervention.
Speculative Positions on Japanese Yen
Source: Bloomberg.
Notably, the timing was perfect. Speculators had pushed net short positions in the yen to their highest levels since 2024, while hedge funds’ short positions had soared to their highest level since 2007. Confusion over whether Kevin Warsh wants to raise rates or will wait until the last minute caused investors to flee the US dollar.
The key question is whether the current USD/JPY exchange rate is fundamentally justified. Based on the yield spread between US and Japanese government bonds, the pair appears to have moved closer to levels supported by market fundamentals. However, currency markets are also pricing in expectations for future Fed and Bank of Japan interest-rate policies. This is where Tokyo’s cautious approach could become a vulnerability—potentially leading to the pattern seen after the interventions in April and May. In that scenario, the dollar could resume its advance.
Market Expectations for Fed and BOJ Interest Rates
Source: Bloomberg.
Weekly USDJPY Trading Plan
The joint intervention managed to scare speculators but hardly discouraged traders from attempting to recover their losses. In currency markets, every victory comes with the possibility of a setback. The strategy of selling USD/JPY from 163.35 proved highly effective. However, the Bank of Japan’s slow response and the renewed activity of carry traders create conditions for taking profits and considering long positions—at least while the pair remains above ¥156.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of USDJPY in real time mode
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