US and Japan jointly intervene to rescue Yen
Photo file. Courtesy: Al Jazeera
In a rare coordinated move, Japan and the United States confirmed they jointly intervened in foreign exchange markets last week to halt a sharp slide in the yen after the currency plummeted to a new 40-year low.
This marks the first joint FX intervention between Washington and Tokyo since 2011, when the two nations took coordinated action to weaken the yen following the catastrophic earthquake and tsunami in eastern Japan.
Why Both Nations Stepped In
The joint effort underscores growing concerns that a continued sell-off in the yen—and Japanese government bonds—could destabilize the global economy and potentially elevate borrowing costs for the US government.
"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," explained Shigeto Nagai, head of Japan economics at Oxford Economics, in an interview with the BBC.
Nagai said that the two countries will likely continue to step into the market "intermittently in a coordinated manner for some time." He added, "Even if the actual amount of intervention is not particularly large, the prolonged sense of vigilance regarding intervention will be effective in deterring speculators."
Official Statements & Market Reactions
Confirming the action on Monday, Japan's Finance Ministry said that Friday’s joint operation with the US Treasury Department "countered excessive volatility and disorderly movements in the Japanese yen in recent months."
US Treasury Secretary Scott Bessent also weighed in via a social media post, confirming that 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," Bessent added.
Both Japan's Ministry of Finance and Secretary Bessent signaled that they will not hesitate to execute further joint interventions in the future.
US President Donald Trump addressed the move while speaking to reporters on Sunday: "They have a weakening yen, and they wanted a little bit of help. And we're always there for Japan," Trump said.
Following President Trump's comments, the US dollar dropped 0.2% to 157.07 yen—pulling back significantly from last month’s 40-year high of 164—before edging back up to 157.70 yen after the official statement from Japan's Finance Ministry.
Scale of the Intervention
While Washington has not officially disclosed its financial contribution, a Reuters photograph captured a notepad in front of Secretary Bessent during a Friday cabinet meeting with the handwritten note: "To Do: Buy Japanese Yen $5-10 bill".
Meanwhile, Bank of Japan data suggests Tokyo may have spent nearly $59 billion selling US dollars to buy yen during Thursday's New York trading session, right before Friday's confirmed joint operation with Washington.
Underlying Pressures Facing the Yen
The Japanese currency has suffered historical weakness primarily due to the wide gap between Japanese interest rates and those of other major global economies.
Interest Rates: The Bank of Japan raised its benchmark rate in June to 1%—its highest level since September 1995. However, this remains far below the US Federal Reserve's benchmark rate of 3.50% to 3.75%, leaving the yen far less attractive to global investors.
Structural Headwinds: Beyond rate differentials, Japan continues to contend with long-term economic challenges, including a decades-long decline in its working-age population, sluggish productivity, and a heavy dependency on dollar-denominated energy imports. (Source: BBC)
