Japan and the US have confirmed that they jointly intervened last week to halt a slide in the yen to a fresh 40-year low. The move is the first coordinated action of its kind since 2011, when both countries worked together to weaken the yen after the devastating earthquake and tsunami that hit eastern Japan.
Japan's finance ministry and US Treasury Secretary Scott Bessent have both said they will not hesitate to carry out joint interventions in future. The action underscores efforts by both countries to prevent a sell-off in the yen and Japanese government bonds from affecting the global economy, including the possibility of pushing up borrowing costs for Washington.
“The United States agreed to participate in the coordinated intervention because it serves its national interests by offering the prospect of significant benefits at a low cost,” Shigeto Nagai, head of Japan economics at Oxford Economics told the BBC.
“Even if the actual amount of intervention is not particularly large, the prolonged sense of vigilance regarding intervention will be effective in deterring speculators.”
The two countries are expected to continue intervening “intermittently in a coordinated manner for some time”, he added.
Why is the yen so weak?
The yen is historically weak mainly because Japan has much lower central bank interest rates than other major economies such as the US, which makes the currency less attractive to international investors. The Bank of Japan last raised interest rates in June, increasing its main rate to 1% - the highest level since September 1995. By comparison, the US Federal Reserve's benchmark rate is in a range of 3.50% to 3.75%.
Japan also faces a decades-long decline in its working-age population, low productivity and a heavy reliance on energy imports priced in US dollars.
What did officials say about the intervention?
On Monday, Japan's finance ministry said Friday's intervention with the US Treasury Department “countered excessive volatility and disorderly movements in the Japanese yen in recent months”.
“The coordinated foreign exchange actions countered disorderly yen movements,” Bessent said in a social media post.
“We strongly support Japan's decisive market and monetary steps to correct the substantial undervaluation of the yen,” he added.
“They have a weakening yen, and they wanted a little bit of help. And we're always there for Japan,” US President Donald Trump told reporters on Sunday.
The dollar fell by 0.2% to 157.07 yen after Trump's comments, well below the 40-year high of 164 reached last month, but it rose back to 157.70 yen after the Japanese finance ministry's statement.
Bank of Japan data suggested Tokyo may have sold almost $59bn of US dollars to buy yen when it intervened in New York markets on Thursday, before Friday's confirmed joint intervention with Washington.
The US has not confirmed the size of its intervention, but a photograph of a notepad in front of Bessent during a cabinet meeting on Friday showed the note:
“To Do: Buy Japanese Yen $5-10 bil”
A notepad photographed in front of US Secretary of the Treasury Scott Bessent on Friday
Additional reporting by Osmond Chia
Key Facts
- Japan and the US confirmed they jointly intervened last week to support the yen.
- It was the first coordinated intervention since 2011.
- The Bank of Japan raised rates in June to 1%, the highest since September 1995.
- Bank of Japan data suggested Tokyo may have sold almost $59bn of US dollars on Thursday.
- A photo showed a note in front of Scott Bessent reading: “To Do: Buy Japanese Yen $5-10 bil”.
