Japan, US launch rare joint intervention as yen hits 40-year low
Tokyo and Washington bought yen together after it fell to a 40-year low, with both governments signalling that further coordinated action remains possible
- Japan and the United States jointly intervened in currency markets by buying yen after it fell to a 40-year low against the dollar.
- This marked the first coordinated intervention between the two nations since 2011, prompted by what Japan's Ministry of Finance called "excessive volatility."
- Officials from both countries confirmed the action and stated their readiness to conduct further joint interventions if disorderly market movements continue.
- The joint effort followed previous unilateral interventions by Japan and an interest rate hike that failed to produce a sustained recovery for the currency.
Japan and the United States jointly bought yen to counter the currency’s fall to a 40-year low, with both governments signalling that they were prepared to take further coordinated action if disorderly market movements continued.
Japan’s Ministry of Finance confirmed on Monday that the intervention took place on Friday in response to what it described as excessive volatility and disorderly movements in the yen during recent months.
Finance Minister Satsuki Katayama said the ministry remained alert and was maintaining close communication with the US Treasury.
“We will not hesitate to conduct further joint intervention,” the ministry said.
The bilateral operation was the first of its kind since 2011, when major economies acted together to weaken the yen after the earthquake and tsunami in eastern Japan.
The latest action instead sought to strengthen the currency after the dollar climbed close to 164 yen late in July, its highest level against the Japanese currency in about four decades.
US describes intervention as support for Japan
US President Donald Trump confirmed Washington’s involvement on Sunday, describing the decision to help Japan support its currency as an act of friendship and a measure intended to benefit the global economy.
“They have a weakening yen, and they wanted a little bit of help. And we’re always there for Japan,” Trump told reporters.
The dollar fell by 0.2% to 157.07 yen after his comments. It later recovered to about 157.70 yen following the Japanese ministry’s statement but remained well below the recent peak near 164.
US Treasury Secretary Scott Bessent also confirmed the coordinated operation and said Washington would not hesitate to take part in another joint intervention.
He expressed support for Japan’s market and monetary-policy measures to address what he described as a substantial undervaluation of the yen, while again calling for the Bank of Japan to raise interest rates further.
Weak yen raises costs for Japanese households
Japan has struggled to halt a prolonged decline in the yen, which has increased the cost of imported goods and contributed to broader inflation.
Higher prices have placed pressure on household finances and affected public support for Prime Minister Sanae Takaichi’s government.
Japan intervened independently in April and May, buying yen in operations that produced only temporary gains for the currency.
The Bank of Japan raised its benchmark interest rate in June to 1%, its highest level in 31 years, but the increase also failed to generate a sustained recovery in the yen.
The central bank kept monetary policy unchanged on Friday, although it delivered its clearest indication so far that another rate increase could come relatively soon.
Earlier Bank of Japan data suggested that Tokyo may have sold as much as US$58.97 billion to buy yen in New York on Thursday, before the confirmed joint intervention with the United States the following day.
Fed liquidity facility could be expanded
Bessent said the United States would consider increasing the size of the Federal Reserve’s repurchase facility for foreign central banks and monetary authorities over the coming months.
The facility provides temporary access to dollar liquidity and was introduced in 2020 to stabilise financial markets during the Covid-19 pandemic.
It could allow Japan to obtain dollars without selling US Treasury securities outright, reducing the risk that intervention by Tokyo would add further upward pressure to US government bond yields.
Japan’s finance ministry had referred to the facility in a rare social-media statement on Saturday, saying it had access to a broad range of tools for addressing market liquidity requirements.
Analysts viewed the coordinated intervention as evidence that Tokyo and Washington were seeking to prevent instability in the yen and Japanese government bonds from spreading into other markets.
South Korea also intervened to support the won on Thursday, pointing to wider regional concern over sharp currency movements.
