Japan's Reserve Arsenal
Goldman Sachs strategist Karen Fishman said Japan would not need most of that pool to match July's operation. The FIMA repo facility allows central banks to borrow dollars against Treasury holdings, potentially making the full $1 trillion available. That gives Tokyo more room than the cash on hand suggests.
Why the Yen Keeps Sliding
The rate gap between Japanese and U.S. borrowing costs is a driver: 10-year Treasury yields near 4.69%, JGB yields 2.839%. Markets price a 65% chance the Bank of Japan raises rates by a quarter point in September. Fishman said a miss on that hike would renew pressure on the yen.
What Could Trigger Another Move
A softer U.S. inflation or jobs print could ease pressure and revive bets on another intervention, according to Shah. Options markets still price elevated premiums on short-dated yen calls, signaling investors remain wary of betting against a rebound.
The July Operation and Its Limits
Tokyo and Washington split the July operation, the first joint U.S.-Japan yen defense since 1998. The yen had slid toward 164 per dollar, its weakest in four decades. Tokyo deployed roughly $85 billion in the operation's first two days. Goldman calls that Japan's largest two-day intervention outside the aftermath of the 2011 Fukushima disaster. After Japan acted alone in April and May, the yen still returned to 40-year lows within months.
Tokyo's next move hinges on Fed and BOJ actions. If the BOJ holds off in September and U.S. data stays firm, the yen could test 160 again — and Japan may have to decide whether to spend more of its reserves.
