USD/JPY Outlook: Yen Weakness Persists as Markets Test Intervention Resolve

USD/JPY remains firmly supported as broad-based yen weakness continues to dominate the FX landscape. Despite repeated warnings from Japanese officials, traders have shown little hesitation in pushing the pair higher, encouraged by the market’s long-standing tendency to fade intervention rhetoric. With price now hovering near the January 2025 high, focus is shifting toward whether yen bears can force a sustained move toward 160 or finally trigger a decisive response from Japan’s Ministry of Finance.

Risk Appetite Drives Persistent Yen Selling

Stepping back, the scale and persistence of yen selling across the FX complex is striking. Expectations that 2025 would mark a turning point for the yen, driven by a more hawkish Bank of Japan, have failed to materialize. Instead, the yen peaked against major peers in April, coinciding with President Trump’s tariff reductions and the resulting surge in global risk appetite.

Since then, the yen has weakened in an almost uninterrupted fashion against the euro, pound, Swiss franc, Australian dollar, and others. Intervention warnings have surfaced periodically, but markets have largely ignored them, treating verbal signals as noise rather than a credible deterrent.

This broad weakness underscores how deeply entrenched bearish positioning has become. The yen’s decline has taken on the characteristics of a one-way trend, with dips repeatedly bought and rallies in yen crosses quickly sold.

Intervention Warnings Struggle to Gain Traction

Japan’s newly appointed Finance Minister Satsuki Katayama has expressed concern over what she described as one-sided yen depreciation, noting that US Treasury Secretary Scott Bessent shares this assessment. The messaging appears designed to revive fears of coordinated intervention between Japan and the United States, a combination that historically carries more weight.

So far, markets remain unconvinced. USD/JPY continues to probe higher, flirting with a break above the January 2025 high. This reaction reflects a familiar pattern. Traders tend to dismiss verbal intervention, often pushing price further in the same direction until authorities are forced to act.

Previous episodes reinforce this mindset. In 2024, USD/JPY surged well beyond the 155 area before the Ministry of Finance finally intervened, triggering a sharp 400-pip drop. However, the impact proved temporary, with the pair stabilising and ultimately resuming its broader uptrend. That history continues to embolden yen bears, even as intervention risk rises.

Technical Picture: Bullish Momentum Meets Event Risk

From a technical standpoint, the trend remains firmly bullish. USD/JPY is pressing against the January 2025 high, with the 159 level acting as the final near-term barrier ahead of a potential move toward 160.

On shorter time frames, an ascending triangle has developed, and price has already broken higher. This structure supports continued dip-buying behaviour, with a sustained hold above 159 opening the door toward 159.50 and the psychologically important 160 handle.

USD/JPY Daily Chart

That said, the closer the price moves toward these levels, the greater the risk of abrupt volatility. Any intervention by the Ministry of Finance would likely be swift and aggressive. Past episodes suggest downside moves of 300 to 400 pips can unfold in very short order, catching late-positioned traders offside.

Bottom Line

USD/JPY remains biased higher, driven by persistent yen weakness and strong risk appetite. However, the balance of risk becomes increasingly asymmetric as price approaches the 159 to 160 zone. While yen bears may continue to press their advantage, trading against the threat of intervention carries rising downside risk. Confirmation above key highs is needed to justify sustained upside, while any sudden reversal should be treated as a reminder that policy risk remains very much alive.