Japan and the United States have conducted a rare joint intervention to strengthen the Japanese yen, a move confirmed by both countries. This coordinated effort aims to halt the yen's slide to fresh 40-year lows and prevent a sell-off in the yen and Japanese government bonds from creating global spillovers, particularly by adding upward pressure on already rising US Treasury yields. Prior to Friday's confirmed joint intervention with the US, Japan may have sold as much as $58.97 billion to buy yen through interventions in New York markets on Thursday.
US Treasury Secretary Scott Bessent confirmed Washington's participation and stated that the US "will not hesitate to participate in further joint intervention." President Donald Trump also noted that the US was helping Japan as a sign of friendship and to support the world economy. The yen reacted positively to the announcement, gaining as much as 1.4 percent to hit a nearly three-month high of 155.20 per US dollar. The dollar also fell 0.6% against the yen to an intraday low of 156.50 in the Asian morning following the confirmation.
Analysts, such as Tsuyoshi Ueno of NLI Research Institute, commented that the "announcement effect of joint intervention is much bigger than solo action by Japan." However, some analysts doubt whether this action can fully counter structural factors driving down the yen, such as the rising cost of fuel due to the Middle East conflict and the persistent wide interest rate differentials between Japan and the US. Bessent also suggested increasing the size of the Federal Reserve's repurchase facility in the coming months, calling it an "important backstop" for dollar liquidity, potentially allowing Japan to raise funds for yen purchases without directly selling US Treasuries.
This joint intervention marks the first coordinated action of its kind since 2011, when both countries worked to weaken the yen after the devastating earthquake in eastern Japan. The current intervention was initiated to counter "excessive volatility and disorderly movements in the Japanese yen in recent months," according to Japan's finance ministry. While the immediate impact saw the yen strengthen, analysts remain cautious about the long-term effectiveness of such interventions without changes to the underlying economic fundamentals.
