The United States and Japan jointly stepped into the currency market last week to support the Japanese yen, marking the first such joint intervention since 1998. The move came after months of planning and talks between officials from both countries, showing a rare agreement between Washington and Tokyo on exchange rate issues.
Japan has tried to stop the yen from falling on its own in the past, but those efforts did not have a lasting impact. This time, Japan got support from US Treasury Secretary Scott Bessent, whose public backing for a stronger yen gave Japanese officials more confidence, according to Reuters.
Why US and Japan backed the yen
Japan wants a stronger yen because a weak currency makes imports more expensive, raising the cost of living for people and creating problems for Prime Minister Sanae Takaichi’s government. The United States also had reasons to support the yen because a weak Japanese currency reduces the trade advantage created by President Donald Trump’s tariffs.
US officials were also worried that heavy selling in Japanese government bonds could push up US Treasury yields. Because both countries had similar concerns, they started holding much closer discussions on exchange rates, which has traditionally been a sensitive issue between them.
Months of US-Japan planning
US participation in yen-buying was first discussed as early as January. During that period, the New York Federal Reserve even carried out rare rate checks to help Japan deal with the falling yen, a Japanese government official told Reuters.
Japanese Finance Minister Satsuki Katayama said she has spoken with Scott Bessent around 10 times, including online meetings, and many of those discussions covered exchange rates. Katayama also said she spent about three-and-a-half hours talking with Bessent during his visit to Japan in May, including over dinner, according to Reuters.
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The May meeting happened after Japan carried out a massive yen-buying intervention between late April and early May, but the currency continued to weaken. After those talks, Katayama said Japan and the US had been coordinating very closely on foreign exchange matters and would continue working together.
Bessent said Japan’s economy remains “strong and resilient,” and that this should eventually be reflected in the value of the yen, according to Reuters. He also repeated his call for the Bank of Japan (BOJ) to raise interest rates faster because slow rate hikes may not be enough to control inflation.
How the Yen intervention happened
Japan coordinated its intervention plans closely with the BOJ. Late on July 30, Atsushi Mimura gave approval to buy yen and sell US dollars using a speakerphone linked to officials in Japan’s Finance Ministry, according to people familiar with the matter cited by Reuters. The intervention quickly strengthened the yen to around 157.80 per US dollar from about 162.80.
The intervention was supported by the United States. A source told Reuters that the US Treasury informed several banks that it might intervene in the yen market and asked them to be ready for possible action. A Reuters photograph also showed Scott Bessent carrying a notepad with the words “To Do” followed by “Buy Japanese Yen (JPY) $5-10 bil.”
BOJ rate hike in focus
The BOJ gave its strongest signal yet that it may continue raising interest rates. During his press conference, BOJ Governor Kazuo Ueda stressed the need to stay more alert than ever to inflation risks. Analysts interpreted Ueda’s comments as a strong signal that another interest rate hike could come in September.
Scott Bessent praised Japan’s actions in a post on X, saying, “We strongly support Japan’s decisive market and monetary steps to correct the substantial undervaluation of the yen,” according to Reuters. Bessent also repeated his support for higher BOJ interest rates. Mimura said Japan’s government would align its currency policy with the BOJ’s monetary policy to tackle the weak yen.
Bessent also said on X that he plans to meet BOJ Governor Kazuo Ueda at the G20 finance leaders’ meeting later this month, ahead of the BOJ’s September 17-18 policy meeting. Financial markets now see the BOJ’s September meeting as a real possibility for another interest rate increase.