Rare Coordinated Intervention by Japan and U.S.

Embracing a serious concern on extreme devaluation of Japanese yen, financial authorities in both governments of Japan and the United States made coordinated intervention in currency market. Both governments announced on August 3rd that they made intervention of purchasing Japanese yen, causing steep rise of yen’s value in foreign exchange. It is still unclear whether this urgent action will bring stability in a string of yen’s depreciation. 

Minister of Finance, Satsuki Katayama, issued a statement that announced coordinated intervention by Japanese Ministry of Finance and U.S. Department of Treasury of purchasing Japanese yen on July 31st in EST of the U.S. “This joint action was taken pursuant to the U.S.-Japan Finance Ministers’ Joint Statement issued in September 2025 and countered excessive volatility and disorderly movements in the Japanese yen in recent months,” said Katayama in the statement. The statement stressed that both governments would not hesitate to conduct further joint intervention.

 

Receiving the message, the markets showed quick response. Japanese yen temporarily rose to 155 yen against one U.S. dollar later on August 3rd. Compared to the level in late July, when it was exchanged at the rate of 163 yen for a dollar, the value of Japanese yen surged by 8 yen in a week. It was the first Japan-U.S. coordinated intervention since 2011, when Great East Japan Earthquake occurred and they purchased dollar to avoid yen’s appreciation. It was 28 years ago when they lastly purchased yen at the time of consecutive bankrupts of Japanese financial institutions.

 

It is supposed that financial policies of Prime Minister Sanae Takaichi caused current depreciation of Japanese yen. Takaichi Cabinet approved its Basic Policy on Economic and Fiscal Management and Reform on July 21st, which encouraged a large amount of public and private investment, followed by depreciation of Japanese yen to 163 yen per dollar and highest interest of long-term bonds in these 30 years.

 

The intervention on July 31st was recognized as a defensive measure for Takaichi’s decision of further fiscal mobilization. Hours after the joint intervention, Takaichi announced introduction of consumption tax cut with no viable fiscal resource. Some lawmakers in ruling Liberal Democratic Party (LDP) opposed her idea, criticizing her of irresponsible fiscal management.

 

The statement of Katayama referred to Japan’s plan to utilize U.S. Federal Reserve’s Foreign and International Monetary Authorities (FIMA) Repo Facility, which enables Japan to procure U.S. dollar collateralizing U.S. government bonds possessed by Japan. Katayama meant it to secure a resource of future interventions. “This is the completion of Japan-U.S. currency alliance,” told Vice-minister of Finance for International Affairs, Atsuchi Mimura, to the press.

 

It is obvious, however, the U.S. seeks its own interest. Depreciation of Japanese yen and rise of long-term bond’s rate may ignite a chain reaction of U.S. long-term bond’s rate hike. U.S. Treasury purchased Japanese yen with selling of Euro this time, trying to avoid negative impact on its own bond market.

 

“A stable yen is not only important for the U.S., but very important for the entire region,” Bessent said to the interview of U.S. television. It is possible that the coordinated intervention is not about alliance or friendship, but a pressure of the U.S. on Takaichi’s handling of economic policy.

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