Japan and US Confirm First Joint Yen Intervention Since 2011 After 40-Year Low
- Japan's Ministry of Finance and US Treasury Secretary Scott Bessent both confirmed the coordinated currency intervention last week
- Bank of Japan data suggested Tokyo may have sold nearly $59bn in US dollars to buy yen before the joint action with Washington
- Both governments warned they would not hesitate to carry out further joint interventions if the yen continues to weaken
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Japan and the United States have jointly confirmed that they stepped into currency markets last week to slow a sharp decline in the yen, which had fallen to its weakest level against the dollar in four decades.
Japan's Ministry of Finance and US Treasury Secretary Scott Bessent both acknowledged the coordinated action, which marks the first time the two countries have moved together on currency markets since 2011, when they acted jointly to weaken the yen following the earthquake and tsunami that struck eastern Japan that year.
Source: Getty Images
Why the Two Countries Moved Together
According to BBC, the intervention reflects shared concerns that a continued yen sell-off, alongside a slide in Japanese government bonds, could ripple through the global economy and potentially push up borrowing costs in countries including the United States itself.
Bank of Japan data showed that Tokyo may have spent close to $59 billion buying yen in New York markets on Thursday, a day before Washington joined the effort on Friday. The US has not disclosed the exact size of its contribution, though a Reuters photograph of a notepad visible during a cabinet meeting showed a handwritten note in front of Bessent that read: "To Do: Buy Japanese Yen $5-10 bil".
On Monday, Japan's finance ministry said the Friday action "countered excessive volatility and disorderly movements in the Japanese yen in recent months."
Bessent, posting on social media, said the "coordinated foreign exchange actions countered disorderly yen movements" and added that Washington "strongly supports Japan's decisive market and monetary steps to correct the substantial undervaluation of the yen."
Both governments said they would not rule out further coordinated moves in the future.
Structural Weakness Behind the Yen's Decline
The yen has remained historically weak largely because Japan's central bank has kept interest rates far below those of other major economies. The Bank of Japan raised its main rate to 1% in June, the highest it has been since September 1995, but that still sits well below the US Federal Reserve's benchmark range of 3.50% to 3.75%, making the yen less attractive to international investors.
Japan also contends with longer-term pressures, including a shrinking working-age population, weak productivity growth, and heavy dependence on energy imports denominated in US dollars.
Shigeto Nagai, head of Japan economics at Oxford Economics, told the BBC that Washington joined the intervention because "it serves its national interests by offering the prospect of significant benefits at a low cost."
He added that the two countries are likely to continue intervening "intermittently in a coordinated manner for some time," and that even modest interventions could prove effective by keeping currency speculators cautious. "Even if the actual amount of intervention is not particularly large, the prolonged sense of vigilance regarding intervention will be effective in deterring speculators," he said.
Source: Getty Images
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