The collaboration between the United States and Japan to shore up the struggling yen has reached a level of coordination not seen in decades, as the two nations jointly push back against selling pressure in the $9.5 trillion daily global foreign exchange market. Japan likely deployed around 8.45 trillion yen on Thursday to intervene in the currency market, while US authorities also inquired with multiple banks about yen exchange rate quotes.
Such "rate checks" are typically viewed as a precursor to foreign exchange intervention, marking the second time this year the US has taken this step. As a result, the yen surged as much as 3.3% against the dollar during New York trading hours. The yen strengthened further on Friday following reports that US authorities informed banks of potential transactions to support the Japanese currency.
As of 2:38 PM New York time, the yen rose 0.9% to 158.84 against the dollar. Reports indicated that the New York Federal Reserve requested yen-to-euro quotes from at least two major US banks on Friday. US Treasury Secretary Scott Bessent also lent verbal support to the yen. The Treasury Secretary, who has significant experience betting on foreign exchange in the hedge fund industry and a deep understanding of Japanese markets, told Fox Business that the yen is "severely undervalued" and that "excessive volatility" is unhealthy.
"Bessent carries a lot of weight," said Nobuyasu Atago, chief economist at Rakuten Securities Economic Research Institute and a former Bank of Japan official. "The US is now increasingly aligned with Japan's intervention efforts." The timing of Thursday's action, which fell between the Federal Reserve and Bank of Japan policy decisions, also drew market attention. Although central banks primarily focus on domestic conditions, speculation persists that monetary policy may have become part of the coordinated effort between Tokyo and Washington.
While Japanese officials remained evasive on Friday about whether they intervened in the currency market—a strategy designed to keep markets guessing—they hinted at US support. Japan's top currency diplomat, Atsushi Mimura, stated that the support received from US authorities went beyond mere "moral backing." Japanese Finance Minister Katsunobu Kato specifically referenced Bessent. "Bessent, as one of the most knowledgeable experts in the market sphere, has indicated that the high government's economic and fiscal policies will drive robust growth for Japan's economy," Kato said. "He conveyed a very clear message: once these policies translate into economic fundamentals, the market will recognize that the yen is undervalued. It is extremely important that we received such a clear signal."
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