ING Think yen why bessent backs himself for successful intervention

THINK economic and financial analysis

Opinion | 17 August 2026 FX UNITED STATES

Yen: Why Bessent backs himself for successful intervention In a recent podcast, I drew the conclusion that US Treasury Secretary Scott Bessent fancies his chances of the recent FX intervention being successful. We agree that the yen is significantly undervalued and are reminded that key policy interventions such as this and those seen in Sweden and Mexico in 2023 can warn of significant FX trend changes

Having made his name with speculative bets on exchange rates, it appears as though Bessent is betting the yen will appreciate

Timing is everything Unlike the 1990s and early 2000s, intervention in major FX pairs is exceptional. And the late July joint intervention between Washington and Tokyo was the first such yen-buying exercise since the Asian FX crisis in 1998. Bessent will have committed a lot of political capital to this intervention and will want to be proved right.

As a former hedge fund portfolio manager, he will know that timing is everything. Japanese unilateral intervention proved successful in the summer of 2024 as it caught the market turn in the Fed cycle, when the US policy rate was subsequently cut 75bp later in the year. But what gives the Treasury Secretary the confidence to intervene now?

THINK economic and financial analysis

We discuss the rationale for the intervention in this article. The timing probably owes to a conviction call that the yen is undervalued, plus a call on yen-supportive policy choices coming out of Japan.

During the intervention, Bessent described the yen as being ‘very undervalued’. We agree and, based on our own fair value models, see the yen as around 20% undervalued against the dollar. Here's what ING FX Strategist Francesco Pesole has to say about our fair-value model:

We generally assess medium-term FX valuation through our Behavioural Equilibrium Exchange Rate (BEER) model, which estimates real fair value using quarterly data on terms of trade, productivity, current account balances and government spending. This framework deliberately excludes shorter-term market drivers such as rates and equities, allowing us to isolate the contribution of economic fundamentals to exchange rates. In USD/JPY, it's particularly visible how the erosion in JPY value is inconsistent with long-term economic fundamentals, and the pair has shown persistently elevated real overvaluation – above 20% – throughout 2026.

USD/JPY strength inconsistent with economic fundamentals

Policymakers can pick the turns While many will be sceptical that joint US-Japan intervention can make any difference in the $480bn per day world of USD/JPY trading, intervention can have an important signalling effect that FX moves have come too far. Two instances come to mind over the past few years when central banks have taken a view on their currencies, and the market has listened.

In June 2023, Sweden’s Riksbank surprised the market with a plan to hedge its FX reserves. This all sounded quite strange, but as we discussed at the time, it reflected the Riksbank’s view that the Swedish krona was undervalued and that a krona rally could generate some unwelcome losses to the Riksbank’s equity capital. At the time, EUR/SEK was trading close to 12.00 and never rose much further. We estimated that the actual hedging might have depressed EUR/SEK by 2-3%, but the Riksbank’s signalling that the krona was cheap resonated broadly.