💹 From 159 to 155 yen per dollar in just one day—a nearly 4-yen surge. Reports that both Japanese and US monetary authorities simultaneously conducted "rate checks" sent shockwaves through the foreign exchange market. With an election looming and fiscal policy debates intensifying, how will this affect Japan's economy? Here's the full story.
What Is a "Rate Check"? Understanding the Pre-Intervention Signal
On January 23, 2026, an unusual event unfolded in both the Tokyo and New York foreign exchange markets: the yen suddenly surged against the dollar. The catalyst was a phenomenon known as a "rate check."
A rate check is when monetary authorities contact market participants—primarily banks and financial institutions—to inquire about current exchange rate levels. While this is not currency intervention itself, it typically occurs as a preparatory step before actual intervention. Markets view it as a strong signal that intervention may be imminent.
What made this situation particularly noteworthy was the possibility that both Japanese and American authorities conducted rate checks almost simultaneously. Market participants reported that the Federal Reserve Bank of New York had contacted major banks requesting reference exchange rates, suggesting that Japanese and US authorities were coordinating efforts to correct excessive yen weakness.
Timeline: What Happened on January 23?
A chronological examination of the day's events reveals a pattern suggesting coordinated Japan-US action.
Bank of Japan Policy Decision and Governor Ueda's Press Conference
The BOJ's Monetary Policy Meeting, which concluded on January 23, decided to maintain the policy interest rate at around 0.75%. Having just raised rates in December 2025, the central bank opted to wait and observe the economic impact.
Governor Kazuo Ueda acknowledged that long-term interest rates were rising "at quite a rapid pace" but avoided giving any specific timeline for additional rate hikes. Markets interpreted this as dovish, and expectations that the Japan-US interest rate differential would remain wide triggered yen selling. The currency briefly fell to around 159 yen per dollar.
Sudden Volatility in Tokyo
However, everything changed around 4:40 PM, shortly after the press conference ended. In just about 10 minutes, the yen surged approximately 2 yen to the 157 range. By 5:00 PM, it had retreated back to around 158, showing significant volatility.
Speculation spread that the BOJ had conducted a rate check. Finance Minister Satsuki Katayama and Vice Minister for International Affairs Jun Mimura both declined to confirm or deny whether a rate check or intervention had occurred.
Further Surge in New York
Later in the New York session, the yen's rise accelerated further. From trading around 158 in the morning, the currency experienced two sharp rallies around midday, briefly reaching 155.60—the biggest single-day gain in about six months.
The driving force was reportedly information that the New York Fed had conducted a rate check with major banks. Some suggested the Fed acted at the Treasury Department's request, reinforcing the view that US and Japanese authorities were coordinating to address excessive yen weakness.
Background: The Katayama-Bessent Understanding
The groundwork for this coordination was laid in mid-January.
Finance Minister Katayama met with US Treasury Secretary Scott Bessent on January 13 in Washington, during a G7 finance ministers' meeting on critical minerals. During this meeting, Katayama expressed that she was "concerned about one-sided yen weakness," and Bessent reportedly shared this view.
Treasury officials later confirmed that the two sides agreed to maintain communication "at the deputy minister level as needed" regarding exchange rate developments.
After returning to Japan, Katayama continued to warn markets: "Secretary Bessent and I share the view that recent movements that don't reflect fundamentals are excessive." She repeatedly stated her readiness to "take decisive action including all available measures."
A joint statement released by the US and Japanese finance ministers in September 2025 had already established that currency intervention should be limited to addressing excessive volatility—providing the framework for this coordination.
Why Did Japan and the US Act Now?
Election Dynamics and Fiscal Concerns Fueling Yen Weakness
On January 23, Prime Minister Sanae Takaichi dissolved the House of Representatives at the opening of the ordinary Diet session, launching the campaign for the February 8 general election.
Multiple parties, including the ruling coalition, have pledged consumption tax cuts. Prime Minister Takaichi herself has called for temporarily reducing the consumption tax on food to zero for two years, describing it as her "long-held aspiration."
However, this aggressive fiscal stance has heightened concerns about fiscal deterioration in financial markets. Long-term interest rates have risen to 27-year highs, yet yen weakness persisted even as the Japan-US interest rate differential narrowed.
Since reports of a potential dissolution emerged on January 9, the yen had weakened to its lowest level in a year, falling from 158 to 159 per dollar.
Is 160 the Authorities' "Line in the Sand"?
Market participants widely view 160 yen per dollar as the government's "defense line." The government-BOJ yen-buying interventions conducted in 2024 occurred when the currency exceeded this level.
This week's coordinated action is interpreted as a clear message from both Japanese and US authorities that they will not tolerate excessive yen weakness as the exchange rate approached 160.
The Trump Administration Factor
President Trump had threatened tariffs on eight European countries over Greenland, briefly triggering a "triple decline" in stocks, bonds, and the dollar, though he later reversed course. With the January 27-28 FOMC meeting expected to keep rates unchanged, US-side factors had largely been priced in.
Against this backdrop, Secretary Bessent's earlier statement that he expects Japan to "respect G7 agreements" regarding currency matters may be relevant. Allowing speculative yen selling to continue could lead to disorderly market conditions—something the G7 framework aims to prevent.
Outlook and Implications for Japan's Economy
Will Actual Intervention Follow?
Historically, there's often a time lag between rate checks and actual intervention. In September 2022, intervention came about a week after rate checks were conducted.
However, with rate checks now confirmed on both sides of the Pacific, market wariness of "live ammunition" intervention has intensified. Past interventions have sometimes moved the exchange rate by more than 5 yen, meaning actual intervention could push the yen into the low 150s.
The BOJ's Policy Path
While the BOJ held rates steady this time, it revised up its inflation forecasts in its Outlook Report. Board member Hajime Takata proposed raising the policy rate to 1.00%, arguing that the 2% inflation target had largely been achieved.
Additional BOJ rate hikes would narrow the Japan-US interest rate differential, supporting the yen. However, political considerations ahead of the election could delay rate increases, potentially sustaining yen weakness.
Impact on Daily Life in Japan
Yen weakness pushes up import prices, affecting consumers through higher energy and food costs. If inflation remains elevated, the benefits of any consumption tax cut could be offset.
Conversely, a sharp reversal to yen strength would squeeze export company profits and potentially trigger stock market declines. Exchange rate stability has become a crucial concern for Japan's economy.
How Is the World Reacting?
This Japan-US coordination has attracted international attention. While Japan's past unilateral interventions were sometimes seen as having limited market impact, US cooperation changes the calculus significantly.
Within Japan, some welcome the yen correction, while others question intervention effectiveness or argue that the real problem lies in fiscal policy.
What about your country? How does your government handle sudden currency fluctuations? What are the perspectives on government intervention in foreign exchange markets? We'd love to hear your thoughts in the comments!
References
- https://news.yahoo.co.jp/articles/131973440e21491a366407ba3f51c7f78fd73322
- https://www.jiji.com/jc/article?k=2026012400180&g=eco
- https://www.bloomberg.com/jp/news/articles/2026-01-23/T9C7GFT96OSS00
- https://www.nikkei.com/markets/worldidx/chart/usdjpy/
- https://www.bloomberg.com/jp/news/articles/2026-01-12/T8RW90T9NJLS00
Reactions in Japan
Finally, Japan and the US are working together to stop the yen's decline. Life has been really tough due to high prices, so I hope this brings some relief.
A 4-yen move just from rate checks shows how much the forex market is driven by speculative money. I don't think this is a fundamental solution.
I work for an export company, and sudden yen appreciation is really problematic. It throws off all our plans. Stability would be most welcome.
In the end, isn't it unrealistic to want both consumption tax cuts and aggressive fiscal policy while also stopping yen depreciation? Pick one.
I can hardly believe the US is cooperating with Japan's currency intervention. There must be something going on behind the scenes.
As an FX trader, this day was terrible for my heart. Many people must have lost big because they couldn't cut their losses in time.
Intervention only has temporary effects. Without proper BOJ rate hikes, yen depreciation won't fundamentally stop.
Maybe overseas travel will finally become more affordable! When I went to the US last year, the weak yen made it really painful.
Intervening right before an election? Isn't that too political? What happened to BOJ independence?
As someone in the inbound tourism industry, yen appreciation is a problem. Our sales last year were amazing thanks to the weak yen.
The Finance Ministry and BOJ saying 'no comment' all the time just confuses the market. We need more transparency.
The coordination between Treasury Secretary Bessent and Minister Katayama seems to be working better than expected. Japan-US relations matter.
I don't care how, as long as food prices come down. My wallet cries every time I go to the supermarket.
I'm worried about stock prices falling, but it's better than continued yen weakness. Wonder what'll happen to the stocks I bought through NISA.
Possible coordinated Japan-US intervention for the first time since 1998? This could be a historic moment.
As long as the Takaichi administration's aggressive fiscal policy continues, intervention is just a drop in the bucket. Fiscal discipline needs to be restored.
As an American, it's interesting to see the Fed helping Japan defend its currency. The Trump administration always criticized Japan's weak yen, so this is a significant policy shift.
In France, government currency intervention isn't discussed much, but this Japan-US coordination seems like an important move within the G7 framework.
From a German perspective, central bank independence is crucial. Intervening in currencies for political reasons isn't good in the long term.
In the UK, many remember Black Wednesday in 1992, so there's skepticism about government currency intervention. Sometimes you can't beat the market.
From China's perspective, Japan-US currency policy coordination might be good for overall Asian currency stability. But I sense political intentions too.
Korea is also dealing with won weakness, so we're watching Japan closely. Secretary Bessent mentioned the Korean won too, so there might be implications for us.
Currency fluctuations are a big issue in Mexico too. If only we had countries willing to cooperate to stabilize our currency like Japan does with the US.
The Indian rupee is also weak against the dollar, so Japan's situation isn't someone else's problem for us. Advanced countries have the reserves to intervene, which is nice.
In Poland, exchange rate policy has become complicated since joining the EU. In a way, I envy Japan's ability to pursue independent monetary policy.
As an Australian, the timing of Japan's election and currency intervention overlapping isn't coincidental. The politics-economics relationship is universal.
Brazil has experienced many currency crises, so it's nice to see a country like Japan that can act preemptively. But it might not be a fundamental solution.
From the Netherlands, balancing Japan's aggressive fiscal policy with currency stability seems difficult. Without fiscal consolidation, it's not sustainable.
Egypt also has serious currency issues, but we have no choice but to rely on the IMF. I envy the cooperative relationship Japan has with the US.
As a Japanese living in Canada, I always worry about exchange rates when sending money to Japan. A stronger yen means I can send more to my family back home.
In Switzerland, the central bank has years of experience with currency intervention. It works, but the costs are significant. Japan needs to be prepared for that.
From Russia, cut off from forex markets due to sanctions, the Japan-US coordination feels like a distant story. But it's interesting news nonetheless.