US, Japan intervene jointly to lift yen from 40-year low

Currency markets absorbed a rare coordinated intervention last week as the United States and Japan bought yen to arrest a slide that had carried the currency to its weakest level in four decades. The move lifted the yen from near 164 to the dollar to levels around 155-157, though gains later moderated. Officials in both capitals signaled readiness to repeat the action if volatility returns.

The yen’s decline stemmed from a wide gap in policy rates. Japan’s benchmark stood at 1 percent after the June increase, while the Federal Reserve’s range sat at 3.50-3.75 percent. That differential sustained a carry trade in which investors borrowed in yen to purchase higher-yielding dollar assets. Japanese authorities also cited concerns over excessive moves that could raise global borrowing costs, including for the US Treasury.

Japan’s Ministry of Finance stated that the joint operation countered disorderly movements. Treasury Secretary Scott Bessent posted that Washington would not hesitate to participate again and expressed support for steps to address the yen’s undervaluation. President Trump told reporters the United States was responding to a Japanese request for assistance. Bank of Japan data indicated Tokyo sold roughly $36-59 billion in dollars to purchase yen during the New York session; the US amount remains unconfirmed, though a Reuters photograph showed Bessent’s notepad listing a possible $5-10 billion purchase.

This marks the first such bilateral action since March 2011, when the two governments intervened after the Tohoku earthquake and tsunami. Analysts at UBS and HSBC noted that the yen’s structural challenges—negative real rates, gradual Bank of Japan normalization, and fiscal expansion plans—limit prospects for a sustained rally. Oxford Economics added that the intervention reduces immediate depreciation risk but does not alter the central bank’s likely December timing for further rate decisions.

Market reaction stayed measured. The dollar traded near 157.70 yen after initial gains faded. Some reports indicated the US may have sold euros rather than dollars to fund its portion, a detail that drew analyst comment on whether the mechanics could affect perceived commitment. Officials have not confirmed the currency composition.