As USD/JPY plunged deeper into depreciation territory and the market approached the brink of losing control, the long-anticipated intervention by Japanese authorities finally arrived with full force. During the Golden Week holiday period spanning late April and early May, Japan’s Ministry of Finance launched a surprise foreign exchange intervention while global trading activity was relatively subdued and market liquidity was thin. According to official data released afterward, the Ministry of Finance deployed a record ¥9.79 trillion between April 26 and May 29, with market estimates suggesting that the largest single operation amounted to approximately ¥4.68 trillion. This article provides a comprehensive analysis of the background behind Japan’s ¥4.68 trillion intervention, the rationale for its timing, the execution strategy, and the deeper strategic considerations behind carrying out the operation during the low-liquidity Golden Week period.
This large-scale intervention did not emerge out of nowhere. It was the inevitable result of multiple pressures converging. The yen’s persistent depreciation had begun to undermine the foundations of Japan’s economy, forcing policymakers to take decisive action.
The primary driver of yen depreciation remains the enormous interest rate gap between the United States and Japan. Since 2022, the Federal Reserve (Fed) has implemented its most aggressive tightening cycle in decades to combat inflation, pushing the federal funds rate to elevated levels. In contrast, the Bank of Japan (BOJ) maintained its ultra-loose monetary policy stance to support a fragile economy. Even after symbolically ending negative interest rates in March 2024, policy rates remained close to zero. This substantial interest rate differential made “Carry Trades” highly attractive. Investors borrowed low-cost yen and converted them into higher-yielding currencies such as the US dollar to purchase income-generating assets, creating sustained selling pressure on the yen. For a deeper understanding of the root causes behind yen depreciation, readers may refer to a dedicated analysis on the topic. 
The Massive US-Japan Interest Rate Differential Is the Fundamental Force Driving Yen Depreciation and Encouraging “Carry Trades”.
Beyond the fundamental interest rate gap, international speculative capital increasingly viewed the yen as an ideal short-selling target. Whenever strong US economic data reinforced expectations that the Federal Reserve would keep rates “Higher for Longer”, USD/JPY moved higher. On the eve of the intervention, USD/JPY briefly broke above the psychologically significant 160 level, reaching a 34-year high. Market sentiment became overwhelmingly bearish toward the yen, creating a self-reinforcing cycle of panic selling. This ultimately served as the direct catalyst for intervention by Japan’s Ministry of Finance.
Before taking direct action, Japanese Finance Minister Shunichi Suzuki and Vice Finance Minister Masato Kanda repeatedly issued “verbal intervention warnings”, emphasizing that “all options remain on the table” in response to excessive exchange rate movements. However, without accompanying action, markets gradually became desensitized to these warnings and, in some cases, interpreted them as tacit acceptance of further yen weakness. This growing indifference eventually convinced Japanese authorities that only actual intervention backed by real capital could halt the accelerating depreciation crisis.
The decision to intervene during Japan’s “Golden Week” holiday period, particularly toward the end of New York trading hours, was a carefully calculated strategic move.
Market liquidity refers to the ability to buy or sell assets without significantly affecting their price. During Golden Week, Japanese financial institutions are closed, while trading participation in Europe and North America may also decline because of holiday-related factors. As a result, overall foreign exchange trading volume and order-book depth are significantly reduced. In such a “thin market”, even a relatively small amount of capital can have a significant impact on exchange rates. The Japanese Ministry of Finance took advantage of this condition, using limited “firepower” to maximize the effectiveness of its intervention.
Japanese Authorities Leveraged the “Shallow Market” Conditions of Golden Week to Generate Greater Exchange Rate Impact With the Same Amount of Intervention Capital.
Speculators fear uncertainty more than anything else. Launching an intervention when the market assumes that authorities may be less active due to holidays is one of the most effective ways to catch traders off guard. When exchange rates suddenly move sharply against market expectations, large numbers of short-yen stop-loss orders are triggered, creating a chain reaction known as a “Short Squeeze”. Such surprise operations not only reverse market momentum in the short term but also reshape market psychology, making speculators think twice before challenging key levels in the future.
In fact, intervening during periods of reduced liquidity is a well-established tactic employed by both the Bank of Japan and the Ministry of Finance. Looking back, similar patterns can be observed during the response to the yen’s appreciation following the 2011 Great East Japan Earthquake and during the interventions of 2022. Japanese authorities frequently prefer to act during New York afternoon trading or early Asian trading hours, when market participation is thinner, to achieve maximum deterrent effect at minimum cost.
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According to official data released by Japan’s Ministry of Finance, the intervention campaign consisted primarily of two major operations, with a combined value of ¥9.79 trillion, significantly exceeding initial market expectations.
Market participants generally believe that the first large-scale intervention occurred on April 29, which was a Japanese public holiday. After USD/JPY reached a high of 160.24, the exchange rate suddenly plunged more than 500 pips within approximately one hour, falling toward the 155 area. Based on changes observed in Bank of Japan current account balances, analysts estimated that the intervention may have totaled as much as ¥5.5 trillion. The signaling effect of this operation was powerful. It clearly communicated the authorities’ tolerance threshold and helped keep USD/JPY at relatively lower levels during the following trading sessions.
Just two days later, following remarks by Federal Reserve Chair Jerome Powell that markets interpreted as less “hawkish” than expected, the US dollar weakened and the yen temporarily stabilized. However, when traders attempted to push the exchange rate higher again, Japanese authorities were believed to have intervened once more during New York trading hours on May 1. USD/JPY fell sharply from around 157.50 to near 153 during the session. Market estimates placed the size of this intervention at approximately ¥3.6 trillion. Together, these two forceful operations successfully pushed USD/JPY away from the dangerous 160 zone and helped stabilize the exchange rate within a range of approximately 155 to 158 over the following weeks.
How does the market estimate the scale of intervention before the Ministry of Finance releases its official intervention data at the end of each month? The answer lies in the Bank of Japan’s daily report on the “factors affecting changes in current account balances”. When the Ministry of Finance decides to intervene (selling US dollars and buying Japanese yen), it utilizes funds from its Foreign Exchange Fund Special Account held at the central bank. This operation increases the balances of financial institutions’ reserve accounts with the central bank (i.e., current accounts held at the central bank). Market participants then use forecasting models to remove the effects of routine factors such as tax payments and government bond issuance, attributing any excess changes in liquidity to foreign exchange intervention. This allows them to derive a relatively accurate estimate of the intervention size. This is also how specific figures such as “¥4.68 trillion” were originally estimated.
Market Analysts Infer Intervention Size by Monitoring Abnormal Capital Flows Through Central Bank Accounts.
The record-breaking intervention campaign achieved notable short-term success, although its long-term effectiveness remains uncertain.
The most immediate impact was a sharp rebound in the yen. USD/JPY quickly retreated from above 160 to the 152-153 range, successfully disrupting one-way speculative positioning. However, as long as the fundamental issue of the US-Japan interest rate differential remains unresolved, depreciation pressure on the yen persists. Although the exchange rate did not immediately return to 160 after the intervention, it continued trading within a range of approximately 155 to 158, suggesting that markets were still testing the resolve of Japanese authorities. Intervention can influence the “speed” of exchange rate movements, but it is far less effective at changing the underlying “direction”.
As the world’s third-largest economy, Japan’s intervention naturally generated ripple effects across global financial markets. Because intervention involves selling large amounts of US dollar assets (primarily US Treasury securities) to obtain dollar liquidity, it created some short-term pressure on the US bond market. At the same time, heightened volatility in the yen contributed to increased fluctuations in other major currencies such as the euro and the British pound. Traders became more cautious, recognizing that other central banks might also be willing to intervene under similar circumstances.
A: The funds used for foreign exchange intervention primarily come from Japan’s “Foreign Exchange Reserves”. These are foreign currency assets, mainly denominated in US dollars, held by the Japanese government including foreign government bonds (primarily US Treasuries) and cash deposits. Authorities sell these US dollar assets to obtain dollar liquidity, then sell US dollars and buy yen in the market to support the yen exchange rate.
A: According to data from Japan’s Ministry of Finance, Japan’s total foreign exchange reserves stood at approximately US$1.28 trillion as of the end of April 2026, placing it among the largest reserve holders in the world. Although approximately US$62.7 billion, equivalent to around ¥9.79 trillion, was deployed during this intervention campaign, Japan’s reserve position remains extremely strong. In theory, Japan still possesses substantial “ammunition” for future interventions. However, excessive use of foreign exchange reserves could also raise concerns about the country’s long-term fiscal health.
A: For ordinary investors, directly trading against a central bank is generally unwise. First, investors should recognize that intervention can generate extremely high market volatility and should therefore maintain appropriate stop-loss levels and carefully manage exposure. Second, avoid trading during periods when market sentiment is at its most extreme and information flow is highly chaotic. Finally, focus on fundamental analysis and understanding the long-term drivers of exchange rates rather than attempting to predict the exact timing of intervention actions. For beginners, building a solid foundation in foreign exchange investing and risk management is far more important than chasing short-term market movements.
Japan’s Ministry of Finance deployed a record ¥9.79 trillion during the Golden Week holiday period in a low-liquidity market operation that can be viewed as a textbook example of a surprise intervention. From a tactical perspective, the campaign was highly successful, effectively disrupting short-term speculative activity and temporarily slowing the yen’s decline. From a strategic perspective, however, as long as US monetary policy does not experience a significant shift, the massive US-Japan interest rate differential will continue to exert gravitational pressure on the yen. While this intervention bought valuable time for both markets and policymakers, it did not address the underlying source of the problem. For investors, this means that volatility in the yen is likely to remain elevated. Close attention should be paid to future policy signals, risk awareness should remain high, and investment positioning should be approached with caution.
