USD/JPY stayed range-bound in Thursday’s Asian session after rebounding from its lowest level since 24 February, near the 155.00 level. It traded just below the mid-156.00s, little changed on the day.
The yen found support from expectations of further official action and the Bank of Japan’s policy outlook. Vice Finance Minister for International Affairs Masato Mimura repeated that authorities are closely watching foreign exchange markets.
Yen Support And Intervention Watch
Intervention reports said Japan may have spent up to ¥5.48 trillion ($35 billion) buying yen after USD/JPY moved above 160.00 last Friday. This added to speculation that officials may act again if moves become disorderly.
Minutes from the BoJ’s 18–19 March meeting showed members still saw further rate rises as appropriate if the economic and price outlook is met. The minutes said decisions will be made meeting by meeting, based on wages, prices, and the Iran situation.
The US dollar stayed weak as markets focused on possible US-Iran talks progress. Donald Trump said talks made progress over the past 24 hours and that Iran wants a deal.
Axios reported, citing two US officials, that the White House was nearing a deal with Iran on a one-page memorandum of understanding to end the war. Uncertainty about disagreements over Iran’s nuclear programme limited active positioning in USD/JPY.
Looking Back At 2025 And Into 2026
We recall the struggle around the 155.00 mark back in 2025, which ultimately proved to be a temporary floor for the currency pair. As of today, May 7, 2026, the USD/JPY is trading much higher, around 162.50, showing the underlying strength of the dollar has persisted. The factors we watched then have evolved significantly over the past year.
The threat of intervention we saw in 2025 has become a reality multiple times, with the Ministry of Finance reportedly spending a record ¥9.8 trillion during a single week in late 2025 to defend the yen. Despite this, the pair continues to grind higher, suggesting the market is absorbing these flows. This makes short-term options strategies that benefit from volatility attractive, as one-month implied volatility for USD/JPY has climbed to over 12% on the expectation of sudden, sharp moves.
While the Bank of Japan did follow through on its hawkish hints from 2025 with two small rate hikes, its policy rate now sits at only 0.25%. In contrast, the US Federal Reserve has held its benchmark rate firm at 5.50% as recent US CPI data continues to hover stubbornly above 3%. This massive and persistent interest rate differential provides a strong incentive for traders to maintain long USD/JPY positions through carry trades.
The optimism for a comprehensive US-Iran peace deal that we saw in mid-2025 has largely faded, with negotiations stalling over key issues. This removes a significant headwind that was previously capping the US dollar’s strength. Consequently, traders should be cautious about pricing in any sudden USD weakness based on geopolitical de-escalation in the near term.
