Japan and the United States confirmed a coordinated yen-buying intervention on Monday, August 4th, with Japan's finance ministry stating they would not hesitate to take further action. Central bank data indicated Japan may have spent as much as $36.58 billion buying yen during Friday's joint intervention. The yen surged over 1% to 155.20 per dollar following the announcement, its strongest level since early May and a significant recovery from its 40-year low near 164. It was trading around 157 per dollar late on Monday.
US Treasury Secretary Scott Bessent confirmed Washington's participation in Friday's effort, adding that the US "will not hesitate to participate in further joint intervention." President Donald Trump also publicly supported the intervention, calling it a "signal of friendship" and noting that the US gained "financial benefit" from the action. The US Treasury sold euros to buy yen during the intervention, as confirmed by three sources familiar with the matter. Bessent also stressed strong support for Japan's market and monetary steps to correct the yen's undervaluation and called for further interest rate hikes by the Bank of Japan (BOJ).
The intervention underscores both countries' resolve to prevent a yen and Japanese government bond (JGB) selloff from causing global spillovers, particularly by adding upward pressure on already rising US Treasury yields. Analysts highlight that a rapidly weakening yen could force Japan, the largest foreign holder of US government debt with over $1.1 trillion in Treasuries, to sell its US bond holdings to obtain dollars for intervention, potentially driving up US borrowing costs. To mitigate this, Bessent said the US would consider increasing the size of the Federal Reserve's repurchase facility for temporary dollar liquidity, providing a backstop for Japan to exchange Treasury securities for dollars instead of selling them outright.
The coordinated intervention has put the spotlight on the Bank of Japan, which signaled the possibility of a rate hike as soon as its next policy meeting in September. Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities, and Yuki Kimura, bond strategist at Okasan Securities, both believe a September rate hike is a "done deal." The two-year JGB yield, highly sensitive to short-term monetary policy, hit 1.545% on Monday, its highest since 1995, as markets priced in the increased likelihood of an early rate hike. This would help support the yen, as intervention alone may only offer temporary relief.
