Japan and the United States have confirmed carrying out a coordinated foreign exchange intervention to arrest the yen’s sharp depreciation after the Japanese currency fell to a fresh 40-year low against the US dollar.
The joint action, the first of its kind since 2011 when both countries intervened following Japan’s devastating earthquake and tsunami, underscores growing concern over the potential impact of a weakening yen on the global economy and financial markets.
Japan’s Ministry of Finance and US Treasury Secretary Scott Bessent said both governments remain prepared to undertake additional coordinated interventions if necessary to prevent excessive volatility in the foreign exchange market.
Bank of Japan data indicated that Tokyo may have sold nearly $59 billion worth of US dollars to purchase yen during an intervention in New York trading on Thursday, ahead of Friday’s confirmed joint operation with Washington.
Although the US Treasury has not disclosed the size of its intervention, a Reuters photograph captured a note in front of Bessent during a cabinet meeting reading: “To Do: Buy Japanese Yen $5-10 bil.”
Head of Japan Economics at Oxford Economics, Shigeto Nagai, said Washington’s participation reflected its own economic interests.
“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.”
He added that both countries were likely to continue intervening jointly over time to discourage speculative attacks on the Japanese currency.
“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 yen has remained under sustained pressure largely because Japan continues to maintain significantly lower interest rates than other major economies, particularly the United States, making the currency less attractive to global investors.
While the Bank of Japan raised its benchmark interest rate to one per cent in June its highest level since September 1995 the US Federal Reserve’s benchmark rate remains between 3.50 and 3.75 per cent.
Japan is also grappling with long-term structural challenges, including a shrinking working-age population, weak productivity growth and heavy dependence on imported energy priced in US dollars.
In a statement on Monday, Japan’s Finance Ministry said Friday’s joint intervention with the US Treasury had “countered excessive volatility and disorderly movements in the Japanese yen in recent months.”
Treasury Secretary Bessent similarly described the coordinated action as necessary to stabilise currency markets.
“The coordinated foreign exchange actions countered disorderly yen movements, We strongly support Japan’s decisive market and monetary steps to correct the substantial undervaluation of the yen.”
US President Donald Trump also defended the intervention, telling reporters that Washington was willing to assist its ally.
“They have a weakening yen, and they wanted a little bit of help. And we’re always there for Japan.”
Following Trump’s remarks, the US dollar briefly weakened to 157.07 yen before recovering to around 157.70 yen after Japan’s Finance Ministry released its statement. The currency, however, remains well below last month’s 40-year low of 164 yen to the dollar.
Erizia Rubyjeana
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