In Brief:
- US and Japan coordinate first yen intervention since 2011
- Yen rebounds sharply after Tokyo and Washington step in
- Traders question whether intervention can reverse wider pressures
Japan’s Finance Minister Satsuki Katayama is set to confirm on Monday that Tokyo and Washington acted together in the currency market to halt the yen’s slide to 40 year lows against the dollar.
It would be the first joint intervention between the two countries since 2011.
Officials familiar with the plans told Reuters the announcement would refer explicitly to joint action. One source added that the operation remained ongoing as of Sunday.
Katayama is expected to stress both governments’ determination to counter what they view as excessive yen weakness. The Ministry of Finance in Tokyo has so far declined to comment.
What happened
The dollar fell sharply against the yen on Thursday after Japan bought yen for dollars during New York trading hours. Bank of Japan data points to sales of as much as $58.97bn.
That move came hours before the BOJ’s policy meeting on Friday, where the central bank held rates steady while signalling a strong chance of a hike in the near term.
A further yen spike followed Governor Kazuo Ueda’s press conference, which markets read as a second bout of intervention.
What sets this episode apart is Washington’s direct involvement. The Financial Times reported that the US Treasury bought yen on Friday through the New York Fed.
Notably, the Fed sold euros to fund the purchase rather than drawing on dollars directly, a detail that has puzzled currency strategists.
Treasury Secretary Scott Bessent had already signalled his hand days earlier, telling Fox Business the yen looked very undervalued. He was later photographed at a Camp David cabinet meeting with a notepad reading “Buy Japanese Yen $5-10 bil”.
Why it’s happening
The yen’s slide has been driven by a widening gap between US and Japanese interest rates, alongside rising energy costs tied to the war in Iran.
Mounting concern over Japan’s fiscal position has added further pressure, with government bond yields kept artificially low by continued BOJ purchases.
Some analysts argue the US involvement reflects Washington’s own worries about Treasury yields. Japan typically funds yen buying by selling down its holdings of US government debt, a dynamic that can push American borrowing costs higher.
That matters just as the Federal Reserve navigates its own inflation fight, giving Washington a direct stake in how Tokyo manages the yen.
What Happens next
The key question for traders is whether this coordination proves more durable than April’s record intervention.
Japan spent 11.7 trillion yen back then, only for the yen to resume its decline within weeks.
Speculative yen shorts had grown stretched heading into this week according to CFTC data. That helps explain the scale of the bounce, though it says little about whether the rally holds.
With Japan’s bond yields still artificially capped, the underlying pressure pushing the yen lower has not gone away.
Many in the market expect fresh selling to resume once the immediate shock of joint intervention fades.