Japan has confirmed a historic joint currency intervention with the United States to prop up the persistently weak yen, with both nations signaling a readiness to step into the foreign exchange market again if needed.
Japanese Finance Minister Satsuki Katayama stated on Monday that the Ministry of Finance coordinated a market intervention with the U.S. Treasury Department last Friday. In a statement, she said the collaborative effort was aimed at curbing excessive volatility and disorderly moves in the yen over recent months, adding that authorities would not hesitate to conduct another round of joint action. This marks the first time in nearly three decades that the two countries have directly bought yen together to support the currency, following its fall to the lowest level against the U.S. dollar since 1986.
Some investors are concerned that Prime Minister Sanae Takaichi's fiscal spending plans will add further pressure on the yen. Takaichi announced last week a two-year reduction in consumption taxes on food and soft drinks, a move designed to ease the cost-of-living burden on households. However, some analysts worry the policy could worsen the nation's fiscal health and trigger market instability.
In July, the yen approached the 164 mark against the dollar before strengthening rapidly over several trading sessions. Analysts estimate that the Japanese government deployed roughly 8.45 trillion yen (approximately $53.8 billion) to support the currency on Thursday, with further intervention taking place on Friday. Following Katayama's comments on Monday, the yen surged over 1% to 155.50 against the dollar before paring gains to trade around 156.60, down roughly 0.5% on the day. Traders are now closely watching for any signals of renewed intervention.
The intervention weighed on the Nikkei 225 index, which slumped as much as 2.2% before closing nearly 1% lower. Yujiro Goto, chief foreign exchange strategist at Nomura in Tokyo, said Monday's sharp moves were "highly likely" due to official action, with authorities aiming to send a clear message of yen strength. He added that if the yen breaks through the 155 level, intervention might pause, but could resume if depreciation pressures persist.
U.S. Treasury Secretary Bessent earlier posted on social media that the joint currency operation on Friday had corrected disorderly yen movements, and that the Treasury would not hesitate to participate in further joint interventions. Masayuki Nakajima, a strategist at Mizuho Securities, said U.S. participation in the joint action was not solely about the foreign exchange market, but largely aimed at avoiding upward pressure on U.S. Treasury bonds. Last week, the Bank of Japan kept its interest rate at 1%, but Governor Kazuo Ueda stated the central bank would ensure it does not fall behind the curve and could accelerate the pace of rate hikes if necessary.
Nakajima noted that sharp swings in Japanese yields could trigger portfolio rebalancing across global fixed-income markets, affecting U.S. Treasuries and European sovereign bonds. He added that Bessent's comments indicate U.S. policymakers are highly focused on the potential spillover effects of Japanese market volatility on global bond markets. U.S. President Donald Trump said on Sunday evening that the U.S. has a good relationship with Japan, and that Washington was always willing to lend a hand as the yen weakened. When asked what the U.S. gains from the move, he cited economic benefits and advantages for the global economy.
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