The market is testing Tokyo's resolve – and winning for now

The dollar reached 160 yen again on Tuesday, in what RBC Capital Markets describes as a direct and successful challenge to Japanese authorities' credibility. The level was reached just five weeks after Tokyo carried out what is described as the most expensive currency intervention in history, with total spending of 11.7 trillion yen ($73.5 billion) from late April to late May 2026, according to ForexLive.

The speed of the dollar's return is the central message. Normally it takes considerable time for the market to effectively reverse a major intervention. The fact that it happened in under six weeks sends a signal that fundamental market forces are stronger than the central bank's war chest.

Any intervention-driven pullback should be viewed as a tactical entry point for long dollar positions – not as a sign of a trend reversal.
RBC: Buy dollar weakness – the yen is losing the battle against the market - Bilde 1

RBC's strategy: Buy the dips

Abbas Keshvani, Director of Asia Macro Strategy at RBC Capital Markets, recommends what he calls a buy-on-dips approach to the USD/JPY pair. The argument, reported by the Wall Street Journal and relayed by ForexLive, is that intervention-driven declines in the dollar do not represent fundamental trend reversals, but rather temporary openings for new purchases.

Keshvani highlights two structural factors that intervention cannot easily neutralize:

1. Energy costs: The ongoing closure of the Strait of Hormuz is pushing up energy import costs for Japan, which is heavily dependent on imported energy. This weakens the trade balance and puts sustained pressure on the yen.

2. Asset manager positioning: Domestic Japanese asset managers continue to show little willingness to rotate back into yen-denominated assets. Without this capital repatriation, the yen lacks an organic source of strength.

160 JPY
USD/JPY level June 2026
$73.5 billion
Japanese intervention Apr–May 2026
RBC: Buy dollar weakness – the yen is losing the battle against the market - Bilde 2

Katayama: Tokyo is ready, but the market isn't listening

Finance Minister Katayama Satoshi engaged in what currency markets call jawboning – verbal warnings without immediate action – when she repeated on Tuesday that the government's position is unchanged and that Tokyo is prepared to act decisively in the currency market, according to ForexLive.

Katayama also added that she believes Japan can balance fiscal sustainability with growth-stimulating measures. Analysts interpret this as an acknowledgment that repeated market interventions carry a real budgetary cost – and that the government is aware this cannot continue indefinitely.

The tension between Tokyo's stated readiness and the market's demonstrated ability to rapidly reverse interventions is, according to ForexLive, the dominant dynamic in yen trading at the moment.

Structural weakness turns interventions into short-term patches

The fundamental problem is that Japan, without a significant rate hike from the Bank of Japan or a structural weakening of the dollar, is fighting market flows with temporary measures. Interest rates in Japan remain far lower than in the United States, which sustains the attractiveness of borrowing cheap yen and deploying the funds into dollar-denominated assets – the so-called carry trade.

160 yen per dollar has become a symbolic line in the sand – but the market keeps crossing it again and again.

RBC's recommendation reflects a broad consensus among currency analysts that structural intervention without monetary policy support has limited lasting effect. Until the Bank of Japan signals a more aggressive tightening stance, or energy markets improve significantly, the arrows continue to point upward for USD/JPY according to RBC.

Sources: ForexLive/InvestingLive, Wall Street Journal (via ForexLive)