The Japanese yen slipped back toward 159 to the dollar on Monday, erasing roughly half the gains achieved after last week's historic joint intervention, as a policy dispute between US Treasury Secretary Scott Bessent and Japanese Prime Minister Sanae Takaichi threatens to undermine further coordinated action.
The Bank of Japan kept its benchmark rate at 1 per cent on the same day the US intervened, and has raised rates twice since Takaichi took office last October. With the Federal Reserve's funds rate at 3.5 to 3.75 per cent, the wide gap continues to weigh on the currency. Traders assign roughly a 50 per cent probability of a quarter-point increase at the Bank of Japan's September meeting.
Japan, the largest foreign holder of US Treasuries with $1.14 trillion in holdings, faces pressure as Washington carries a $40 trillion debt burden.