The U.S. dollar fell more than 2% against the Japanese yen on Thursday, its steepest one-day decline since U.S. and Japanese authorities intervened in late July, even as futures assigned better-than-even odds to a Federal Reserve rate increase within two weeks. USD/JPY traded at 155.48 at 10:05 a.m. ET, down 2.03% from Wednesday’s close of 158.70 after touching a session low of 155.40 and an intraday strong point of 156.15, the yen’s best level since Aug. 3. The move extended a roughly 1.2% yen gain on Wednesday and followed a brief push above 160 earlier in the week, reviving desk speculation about whether Japan’s Ministry of Finance had returned to the market after a record 15.4 trillion yen, or about $98 billion, of support between July 30 and Aug. 26. Japan’s Vice Finance Minister for International Affairs Atsushi Mimura said authorities were neither satisfied nor reassured and remained on heightened alert. The deeper driver is a closing interest-rate gap from the Tokyo side: the 10-year Japanese government bond yield stood at 2.967% after touching 3% for the first time since 1996, the two-year JGB yield hit 1.855%, a 12-month high last seen in 1995, and the gap versus the 4.754% U.S. 10-year Treasury narrowed to roughly 179 basis points, near the tightest since 2022. The Bank of Japan’s policy rate is 1.00% after its June 16 hike, overnight index swaps fully price another increase at the Sept. 15-16 meeting, and Bank of America FX strategist Shusuke Yamada recommended selling USD/JPY at 159.70 toward 149.0, arguing risk-reward stays skewed lower even if the Fed hikes, though elevated oil remains a key threat to Japan’s trade balance.