US and Japan jointly intervene to prop up yen in rare move
Both countries have said that they will not hesitate to conduct joint interventions in the future.
In a rare move, the United States and Japan have jointly intervened to bolster the yen.
Last week, Japan and the US confirmed their coordinated action to stop the yen's decline to a new 40-year low. This marks the first joint intervention since 2011, when both nations collaborated to weaken the yen following the devastating earthquake and tsunami in eastern Japan.
Both Japan's finance ministry and US Treasury Secretary Scott Bessent have stated their readiness to conduct future joint interventions. This underscores their commitment to preventing a sell-off in the yen and Japanese government bonds from impacting the global economy, including potentially increasing borrowing costs for Washington.
The yen's historical weakness is primarily attributed to Japan's significantly lower central bank interest rates compared to other major economies like the US, making the Japanese currency less appealing 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. In contrast, the US Federal Reserve's benchmark rate ranges from 3.50% to 3.75%.
Japan also faces challenges such as a decades-long decline in its working-age population, low productivity, and a heavy reliance on energy imports priced in US dollars.
On Monday, Japan's finance ministry stated that 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 posted on social media, adding, "We strongly support Japan's decisive market and monetary steps to correct the substantial undervaluation of the yen."
US President Donald Trump told reporters on Sunday, "They have a weakening yen, and they wanted a little bit of help. And we're always there for Japan." Prime Minister Sanae Takaichi of Japan met with President Trump in March.
Following Trump's remarks, the dollar fell by 0.2% to 157.07 yen, a notable decrease from last month's 40-year high of 164. However, it rebounded to 157.70 yen after the Japanese finance ministry's statement.
Bank of Japan data suggests that Tokyo may have sold nearly $59 billion of US dollars to purchase yen during its intervention in New York markets on Thursday, preceding Friday's confirmed joint intervention with Washington.
While the US has not confirmed the exact size of its intervention, a Reuters photograph of a notepad in front of Bessent during a cabinet meeting on Friday reportedly read: "To Do: Buy Japanese Yen $5-10 bil."