Benson stated "no intervention," making the market even more "uninhibited" in selling yen?
A single sentence from the U.S. Treasury is weakening the yen’s last “psychological defense line.”
According to Chasing Wind Trading Desk, Nomura pointed out in its latest foreign exchange strategy report that U.S. Treasury Secretary Yellen’s public denial of any ongoing U.S. foreign exchange intervention is equivalent to indirectly dismantling the previous “intervention expectation anchor” pressing on USD/JPY, leaving the market with one less concern when shorting the yen.
Judging from market reactions, this statement is not symbolic. After Yellen bluntly said “Absolutely not” on CNBC on January 28, USD/JPY quickly rebounded, rising from near 152.7 to the 153.8 level, almost erasing the previous drop triggered by the “New York Fed checking rates” rumor.
What was truly breached was not the price level, but the “intervention expectation”
In the previous week, USD/JPY quickly retreated from near 160, to a large extent not because of a fundamental reversal, but because the market was highly alert to two things:
Whether the U.S. side has conducted “price checks” through the New York Fed to pave the way for joint interventionWhether Japan's Ministry of Finance (MOF) has quietly entered the market to buy yen
But Nomura emphasized that Yellen’s statement essentially weakened the first assumption. Even if the New York Fed did conduct price checks, that was only a procedural move and does not mean intervention has taken place or is imminent.
The result: the “policy risk premium” in USD/JPY was rapidly compressed, and shorting the yen once again became a “cost-effective” trade.
Has Japan already intervened? The data says: insufficient evidence
The other line of defense comes from Japan itself.
Nomura’s estimate, using daily funding account data from the Bank of Japan, found that during the trading days when USD/JPY dropped sharply, there was no significant or sustained yen buying strength, not enough to support a judgment of “substantive intervention.”
What does this mean? If the U.S. attitude leans toward “not over-monitoring” and the Japanese side has yet to truly take action, then hedge funds and macro traders will naturally come to the conclusion: policy resistance to selling yen at this stage is fading.
The focus is shifting: From “who will intervene” to “can Japan’s fundamentals hold up”
Nomura believes that as forex intervention uncertainty diminishes, market trading logic is shifting—the pricing of USD/JPY will once again return to Japan’s own fundamentals. Three main threads are especially critical:
1. Fiscal: Where will the money for Takai City’s “tax cut promise” come from?
Japan will hold a House of Representatives election on February 8. A Nikkei survey shows the LDP may lead by a wide margin, reinforcing the market’s “Takaichi trade.” But the issue remains: the funding source for the consumption tax reduction has still not been clearly specified.
Nomura notes that if expectations for fiscal expansion continue without a clear financing plan, in the medium term this could place depreciation pressure on the yen while raising expectations for Japanese interest rates. During the election period, any statement regarding “where the money will come from” will be directly reflected in the exchange rate.
2. Inflation expectations: The yen is being held back by “domestic inflation logic”
An easily overlooked change: Japan’s implied market inflation expectations have notably risen since the October 2025 LDP leadership election.
Nomura found the correlation between USD/JPY and Japan’s 10-year breakeven inflation (BEI) has significantly strengthened—rising inflation expectations have actually suppressed the yen’s rebound space. This explains a “counterintuitive phenomenon”: Even if the U.S.-Japan rate spread doesn’t continue widening, the yen still remains weak.
3. Monetary policy: The exchange rate itself is pressuring the Bank of Japan
In the short term, Yellen’s statement may weaken market bets on the BOJ “raising rates soon.” But Nomura also emphasizes a more important mid-term logic: If USD/JPY approaches the mid-150s again, it will be harder for the BOJ to stay patient.
In other words, the weakening exchange rate has itself become an important variable in the BOJ’s reaction function. If the yen depreciates too quickly, rate hike expectations for April or thereafter will be difficult to fully dissipate; terminal rate pricing in Japan may instead be pushed higher. This also means that 160 is not a level that can be “easily breached.”
The yen’s “defensive battle” is entering a new stage
Nomura’s core view can be summarized in three points:
Yellen’s “no intervention” statement has weakened the yen’s short-term defense mechanismIn the absence of clear intervention evidence, the market is more willing to test USD/JPY’s upsideBut medium-term pricing will increasingly depend on Japan itself: fiscal, inflation, and BOJ reaction
In the short term, the yen is indeed more vulnerable; but in the medium term, if depreciation is too rapid, it may instead trigger domestic policy reactions in Japan. This game is shifting from “external intervention” to “internal constraints.”
~~~~~~~~~~~~~~~~~~~~~~~~
The excellent content above is from Chasing Wind Trading Desk.
For more thorough interpretation, including real-time commentary and frontline research, please join the 【Chasing Wind Trading Desk▪Annual Membership】
Risk warning and disclaimerThe market carries risks and investments require caution. This article does not constitute personal investment advice and has not taken into account the particular investment objectives, financial situation, or needs of any individual user. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular situation. Investment is at one's own risk.
