Key facts
- Japan and the US have confirmed a joint foreign exchange intervention to support the yen.
- The yen had recently fallen to a 40-year low against the dollar.
- This is the first coordinated intervention between the two countries since 2011.
- Both nations have indicated a willingness to conduct further interventions if necessary.
- The intervention aims to counter excessive volatility and disorderly movements in the yen.
- Japan's low interest rate policy is a primary driver of the yen's weakness.
Japan and the United States have confirmed a joint foreign exchange intervention aimed at halting the yen's significant slide, which had recently reached a 40-year low. This coordinated action, the first since 2011, underscores the shared concern over currency market volatility and its potential global economic repercussions.
Officials from both countries have indicated a readiness to conduct further interventions if necessary. Japan's Ministry of Finance stated that the action countered excessive volatility, while US Treasury Secretary Scott Bessent affirmed support for Japan's steps to address the yen's substantial undervaluation. President Donald Trump also commented that the US is always ready to assist Japan.
The yen's weakness is largely attributed to the Bank of Japan's persistently low interest rate policy, with its main rate at 1% compared to the US Federal Reserve's range of 3.50% to 3.75%. Japan also faces structural economic challenges, including a declining working-age population and a reliance on dollar-priced energy imports.
Data from the Bank of Japan suggests Tokyo may have sold approximately $59 billion in US dollars to purchase yen during its intervention. While the US has not confirmed the exact size of its contribution, a note seen in front of Secretary Bessent suggested a potential intervention of $5-10 billion.