Will Bessent’s intervention mark a turning point for the yen?

ING analysts have suggested that the yen is currently 20% undervalued against the dollar, with this gap persisting through 2026. This undervaluation has been supported by U.S. Treasury Secretary Scott Bessent's backing of a joint U.S.-Japan intervention, marking the first of its kind since the 1998 Asian financial crisis. Analysts believe Bessent's involvement, as a former hedge fund manager, carries significant political capital and is driven by his conviction that the yen is undervalued and expectations of supportive policy shifts in Japan, such as accelerated Bank of Japan rate hikes.

Markets currently anticipate a 75% probability of a Bank of Japan rate hike in September. The analysts' Behavioural Equilibrium Exchange Rate model indicates that USD/JPY has been overvalued by more than 20% throughout 2026. The potential for durable yen appreciation hinges on Japanese capital remaining onshore, which would depend on Tokyo's new growth strategy and its 370 trillion yen ($2.3 trillion) of public-private investment plan by 2040.

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