The yen’s prolonged weakness against the dollar may be nearing a turning point following coordinated intervention led by U.S. Treasury Secretary Scott Bessent in late July, analysts said. The move, the first joint yen-buying exercise since the 1998 Asian financial crisis, coincides with growing expectations of a Bank of Japan (BOJ) rate hike in September.
ING’s global head of markets, Chris Turner, and FX strategist Francesco Pesole estimate the yen remains roughly 20% undervalued against the dollar based on the bank’s fair-value model. The bank’s Behavioral Equilibrium Exchange Rate (BEER) framework indicates USD/JPY has traded above its equilibrium level by more than 20% throughout 2026. Markets are currently pricing in a roughly 75% probability of a BOJ rate hike at the September meeting, which could further support the currency.
Japan’s new growth strategy, unveiled in July, aims to mobilize 370 trillion yen (approximately $2.3 trillion) in public-private investments by 2040, signaling long-term structural support for the economy. Analysts also note Japan’s ability to retain 46% of its overseas investment income as offshore reinvested profits, compared with 40% for South Korea, 28% for Germany, and 18% for Taiwan, highlighting the country’s persistent capital outflows.
ING’s base-case projections place USD/JPY at 158 by the end of 2026 and 152 by the end of 2027, reflecting a gradual correction from current levels. The potential for structural shifts in Japan’s foreign exchange policy or portfolio reallocations could align with the BOJ’s next meeting on October 30, according to analysts.
Turner described Bessent’s intervention as a speculative bet on yen appreciation, noting his background in currency trading. The move follows Mexico’s Banxico unwinding a $7.5 billion USD/MXN forward short position in September 2023 and Sweden’s Riksbank hedging its FX reserves in June 2023, underscoring broader shifts in global FX management strategies.
