U.S. Initiates "Rate Checks" to Support Yen, Joint Intervention Was Considered

According to a Tuesday report by the Nikkei newspaper citing unnamed U.S. government sources, American authorities proactively initiated "exchange rate checks" in January aimed at supporting the Japanese yen and were prepared to conduct joint intervention if requested by Japan.

The report stated that the rate checks, carried out by the Federal Reserve Bank of New York on behalf of the U.S. Treasury Department, were not conducted at the request of Japan's Ministry of Finance.

Nikkei reported that U.S. Treasury Secretary Bassett led this initiative due to concerns that political uncertainty ahead of a Japanese election could destabilize its markets and spill over into global financial markets.

Citing senior officials close to Bassett, the report indicated that the U.S. authorities conducted the checks as a preliminary step toward potential yen-buying intervention and were considering intervening in the foreign exchange market to support the yen if Tokyo made such a request.

The report noted that several senior U.S. officials pointed out that the rate checks led by Bassett were "based on the principle that the U.S. is prepared to use its economic strength to stabilize an ally."

Neither Japan's Ministry of Finance nor the U.S. Treasury Department immediately responded to requests for comment.

The Federal Reserve confirmed last week that, at the request of the U.S. Treasury, it had asked dealers for USD/JPY exchange rate quotes the previous month. This rare move bolstered the persistently weak yen and put investors on alert for the first U.S.-Japan joint currency intervention in 15 years.

These rate checks occurred as the yen approached the significant psychological level of 160 against the U.S. dollar, a threshold widely seen as increasing the likelihood of yen-buying intervention. Following the checks—often viewed as a precursor to official intervention—the yen surged more than 1% to a three-month high of 152.10. During Asian trading on Tuesday, the yen was trading around 154.60.

Last month, Bassett denied that the United States had intervened in the foreign exchange market. Japanese officials have remained silent on whether rate checks or market intervention were conducted.

The weakness of the yen has become a headache for Japanese policymakers, as it raises import prices and the overall cost of living for households.