Beautiful sleeves stand by, it is hard for the palm to make a sound alone! Traders betting on "one-sided intervention" struggle to stop the weakening of the yen.

After US Treasury Secretary Benson questioned the possibility of joint intervention in the yen, traders began to question the actual effectiveness of Japan's intervention measures if it acted alone to support the yen. On Wednesday, Benson explicitly stated that the United States "will never" intervene in the USD/JPY market, which directly dampened market expectations for joint intervention and caused the yen to drop by 1.2% at one point, marking the largest single-day decline in over five weeks. Prior to this, market rumors of the New York Fed conducting a rate check briefly boosted the yen and pushed the USD/JPY rate close to the 150 level. Although the yen exchange rate has not yet reached the level that is widely believed to trigger immediate intervention by Japanese authorities, traders have had to reassess: from now until the early elections in the Japanese House of Representatives on February 8, what measures might the Japanese government take if the yen undergoes a significant depreciation. Australia Commonwealth Bank strategist Carol Kong said, "Since the possibility of joint intervention is extremely low, the market may test the tolerance line of the Japanese Ministry of Finance, pushing the USD/JPY rate higher again. Without US involvement, any unilateral intervention by the Japanese Ministry of Finance will greatly reduce the effectiveness of easing downward pressure on the yen, which means that the exchange rate rebound after intervention is likely to quickly fade." Apart from intervention measures, investors are also focusing on the fundamental weakness factors that continue to pressure the yen. Japan's real interest rates remain negative, while inflation rates continue to exceed 2%; meanwhile, pricing in the overnight indexed swap market shows that traders expect the Bank of Japan to raise interest rates only twice this year, further reinforcing the market's judgment that Japan's monetary policy lags behind the economic situation. Japan's fiscal risks are also continuing to ferment. It is widely believed that the ruling Liberal Democratic Party will retain a majority of seats in the House of Representatives election, which will increase concerns in the market about the Japanese government's launch of large-scale fiscal stimulus policies and further depreciate the yen. Rodrigo Catril, a foreign exchange strategist at National Australia Bank, said, "The fundamentals of Japan have not changed - the Bank of Japan still maintains loose monetary policy, and the high market government plans to introduce expansionary fiscal policies without funding support. Unless the Bank of Japan's monetary policy undergoes a change, foreign exchange intervention will have a limited long-term impact on the yen." The US stance complicates the situation further. If Japan implements exchange rate intervention, essentially boosting the yen by selling dollars, it will create downward pressure on the dollar; at the current rate, discussions about the dollar embarking on a new downtrend are becoming more heated, and in this context, Japan's intervention measures would require US tacit approval, or else it could easily become a sensitive issue. Tony Sycamore, a market analyst at IG Australia, said: "From the US perspective, if Japan only implements exchange rate intervention and there is no simultaneous change in monetary policy fundamentals, the long-term success of this intervention will be very low, so US support for this would also be greatly discounted. After Benson's statement, I believe the USD/JPY rate will quickly rebound to the 155 level and may even test the 158 level before the market becomes cautious again." In Japan, the decision to intervene in the exchange rate is made by the Ministry of Finance and then executed by the Bank of Japan through a few commercial banks, typically by selling dollars and buying yen in the spot foreign exchange market to support the yen exchange rate. Historical experience shows that Japan's unilateral intervention measures only bring short-term boosts to the yen. In 2024, Japan intervened in the exchange rate four times, each time temporarily appreciating the yen, but it has never been able to reverse the overall depreciation trend of the yen over the years, as the market repeatedly tests the determination of Japanese policy makers to intervene. George Cole and others, strategists at Goldman Sachs, wrote in a research report, "Unless the Bank of Japan accelerates its rate hike pace or the Japanese government tightens fiscal policies, exchange rate intervention alone will find it difficult to achieve long-term stability of the yen exchange rate and effectively alleviate inflation-related risks. In our view, whether the outcome of this House of Representatives election becomes a stalemate situation, or the Japanese government announces a policy shift, fiscal policy adjustments are currently the most likely policy path to drive sustained strength in Japanese government bonds and the yen exchange rate."