Following U.S. Treasury Secretary Beth Cent's skepticism regarding the possibility of joint intervention to support the yen, traders have begun to question the actual effectiveness of any measures Japan might take alone to bolster its currency. On Wednesday, Beth Cent explicitly stated that the U.S. "would not" intervene in the dollar-yen exchange rate market. This remark directly extinguished market hopes for coordinated action and triggered a sharp 1.2% drop in the yen, marking its largest single-day decline in over five weeks. Prior to this, market rumors that the New York Fed was疑似 conducting rate checks had briefly lifted the yen, pushing the USD/JPY rate close to the 150 level. Although the yen's current level has not yet reached the threshold widely believed to prompt immediate intervention by Japanese authorities, traders are now forced to reassess what measures the Japanese government might take if the yen depreciates significantly between now and the snap election for Japan's House of Representatives on February 8th.

Carol Kong, a strategist at Commonwealth Bank of Australia, stated, "With the likelihood of joint intervention now extremely low, markets may test the Japanese Ministry of Finance's tolerance limits by pushing the USD/JPY rate higher again. Without U.S. participation, any unilateral intervention by the Japanese Ministry of Finance would be significantly less effective in alleviating downward pressure on the yen, meaning any post-intervention rally would likely fade quickly."

Beyond intervention measures, investors are also focusing on the underlying weak fundamentals that continue to weigh on the yen. Japan's real interest rates remain negative, while inflation continues to exceed the 2% target; simultaneously, pricing in the overnight index swap market indicates traders expect the Bank of Japan to raise rates only twice this year—an expectation that further reinforces the market's view that Japanese monetary policy remains behind the curve. Japan's fiscal risks are also intensifying. The market widely expects the ruling Liberal Democratic Party to retain its majority in the upcoming House of Representatives election, which could heighten concerns about the Japanese government introducing large-scale fiscal stimulus, thereby exerting further downward pressure on the yen.

Rodrigo Catril, a foreign exchange strategist at National Australia Bank, said, "Japan's fundamentals haven't changed—the Bank of Japan maintains an accommodative monetary policy, and the Sanae Takaichi government plans to introduce unfunded expansionary fiscal policies. Unless the Bank of Japan's monetary policy shifts, foreign exchange intervention is unlikely to have a lasting impact on the yen's trajectory."

The U.S. stance complicates the situation further. In essence, Japanese currency intervention involves selling dollars to buy yen, which would exert downward pressure on the U.S. dollar. At a time when discussions about the dollar potentially entering a new downtrend are gaining traction, Japan's intervention measures would require at least tacit approval from the U.S., otherwise they could easily become a sensitive issue. Tony Sycamore, a market analyst at IG Australia, commented, "From the U.S. perspective, if Japan only intervenes in the currency market without a concurrent shift in monetary policy fundamentals, the long-term success rate of such intervention would be very low, consequently diminishing U.S. willingness to support it. Following Beth Cent's remarks, I believe the USD/JPY rate will quickly rebound towards the 155 level, and could potentially test 158 before markets become cautious again."

In Japan, the decision to intervene in the currency market is made by the Ministry of Finance and executed by the Bank of Japan through a select few commercial banks. The method typically involves selling U.S. dollars and buying Japanese yen in the spot foreign exchange market to support the yen's value. Historical experience shows that Japan's unilateral interventions have only provided temporary boosts to the yen. Japan intervened four times in 2024, each time prompting a short-lived yen appreciation, but these actions consistently failed to reverse the currency's multi-year overall depreciation trend, as markets repeatedly tested the resolve of Japanese policymakers.

Strategists including George Cole at Goldman Sachs wrote in a research note, "Unless the Bank of Japan accelerates its pace of interest rate hikes or the Japanese government tightens fiscal policy, exchange rate intervention alone is unlikely to achieve long-term stability for the yen or effectively mitigate inflation-related risks. In our view, whether the upcoming House of Representatives election results in a hung parliament or prompts a policy shift from the Japanese government, fiscal policy adjustment is currently the most likely policy path to drive a sustained strengthening of Japanese government bonds and the yen exchange rate."