Yen rescue unravelling, US intervention is already failing: deVere CEO
The historic US yen intervention, the first in nearly three decades, is already coming apart, and the shift has happened faster than most investment positioning reflects, warns the CEO of one of the world’s largest independent financial advisory organisations.
Nigel Green of deVere Group’s warning comes as the yen has weakened past 159 per dollar, retracing roughly half of the gains from July’s joint intervention, when the US bought yen for the first time since 1998 to support the currency alongside Japan.
The pair has moved from levels near 152 immediately after that intervention back toward the psychological 160 threshold, undoing much of what the coordinated action was designed to achieve.
“A currency defence that gives back half its gains within weeks is not holding. It is failing in slow motion, and the pace of that unwind is genuinely alarming,” explains Nigel Green.
This matters well beyond currency traders.
A weakening yen defence raises borrowing costs and inflation risk for the world’s fourth-largest economy, threatens to reignite the yen-funded carry trades that have quietly propped up demand for riskier assets globally, and tests whether Washington and Tokyo can coordinate policy credibly at all, a question every central bank watching from the sidelines is now asking about its own alliances.
The timing of the Bank of Japan’s response is where the deVere CEO says the real damage was done.
“On the same day the US made its first currency intervention in nearly three decades, the Bank of Japan sat on its hands,” he says.
“Every lesson from financial market history says coordinated action needs multiple reinforcing moves to actually shift psychology.
“Japan had one shot to back Washington’s move with its own, and it blinked.”
This hesitation reflects a genuine split at the top of US and Japanese policy, not simply bad timing.
“Bessent has spent a year arguing tightening is essential to fix yen weakness. Takaichi has spent that same year terrified of choking off a growth story investors have genuinely bought into,” explains the deVere CEO.
“Markets do not run on public statements of unity. They run on whether the two people steering policy actually want the same outcome, and right now, they clearly do not.”
He points to the numbers behind that hesitation as the real story for investors.
“The Bank of Japan’s benchmark rate sits at just 1%, even after two hikes. Inflation has run above target for most of the past four years,” he says.
“A gap that wide against the Federal Reserve does not stay quiet. Currency markets test imbalances like this constantly, and intervention only buys time, it does not close the gap.”
History is doing more to shape Tokyo’s caution than markets currently appreciate, Nigel Green argues.
“Takaichi’s own political mentor endorsed a Bank of Japan hike in 2006, watched growth stall, and was out of office within a year,” he says.
“The memory is not abstract to her. It is the reason investors betting on fast, decisive tightening from Tokyo are likely to be waiting a lot longer than they think.”
He is blunt about what happens if Tokyo continues to move cautiously while Washington pushes for speed.
“Markets are pricing in another hike by October. Japan has only moved that aggressively once before, in 1989, at the height of its asset bubble,” Nigel Green says.
“Betting on a repeat of that pace, from a government this nervous about its own popularity, is a serious assumption to build a portfolio around.”
Nigel Green concludes with a direct warning to investors watching from outside Japan.
“This is not a Tokyo problem. It is a global one,” he says.
“Whether you’re holding Japanese assets directly, or, perhaps more likely, your portfolio is quietly leaning on a weak yen without you fully realising it, this is the moment to check.
“Don’t wait for 160 to be the wake-up call. By then, it’s likely already too late to act ahead of it.
“When two allied governments can’t agree on the basics of a currency rescue, that’s the moment smart money moves.”