Japan is expected to announce on Monday that Tokyo and Washington have taken joint action in the currency market to support the yen after it fell to its weakest level against the US dollar in 40 years, according to two Japanese government officials familiar with the matter.
Japanese Finance Minister Satsuki Katayama is expected to highlight the two countries’ determination to counter what they consider excessive declines in the yen, the officials told Reuters on condition of anonymity because of the sensitivity of the issue.
Asked whether Katayama would confirm that Japan and the US had carried out “joint action”, one of the officials said yes, adding: “The operation is still ongoing.”
Japan’s Ministry of Finance and the US Treasury Department did not immediately respond to requests for comment.
The expected announcement follows reports of several rounds of yen-buying by Japanese and US authorities. If confirmed, it would represent the first joint intervention by the two countries since 2011.
Japan buys yen as currency weakens
A market source told Reuters that the Japanese government bought yen against the dollar during New York trading hours on Thursday.
Bank of Japan data indicated that Tokyo may have sold as much as $58.97 billion to support the Japanese currency.
The intervention came shortly before the Bank of Japan decided on Friday to leave monetary policy unchanged while signalling that an interest rate increase could come soon.
The difference between Japanese and US interest rates has been a major factor behind the dollar’s strength against the yen. The Federal Reserve has also adopted a more hawkish policy stance, further supporting the US currency.
The yen rose sharply shortly after BOJ Governor Kazuo Ueda held a press conference following the central bank’s decision. Market participants suspected that the move was linked to another round of intervention by Japanese authorities.
Atsushi Mimura, Japan’s senior currency diplomat, suggested that the Ministry of Finance and the Bank of Japan were coordinating their efforts.
“Going forward, as the official responsible for currency policy, I would like to respond in close coordination with monetary policy,” Mimura told reporters after Friday’s rise in the yen.
US Treasury signals readiness for further action
The US Treasury has also indicated that it could become involved in efforts to support the yen.
A source familiar with the matter said the Treasury informed several banks on Friday that it might intervene in the yen market and told them to “stand ready for future action”.
US Treasury Secretary Scott Bessent said last week that the yen “seems very undervalued to me”.
A Reuters photograph from a Friday cabinet meeting also showed a notepad beside Bessent containing a “To Do” list that included the words “Buy Japanese Yen (JPY) $5-10 bil”.
The Japanese Ministry of Finance has also taken the unusual step of publishing a statement in English on X saying it had “a broad range of tools to address market liquidity needs”.
Among those tools is access to the Federal Reserve’s repurchase facility, which can provide temporary dollar liquidity.
The facility, introduced in 2020 during the Covid-19 pandemic, could allow Japan to obtain dollars without directly selling US Treasury securities, potentially reducing some of the funding pressures associated with currency intervention.
Intervention faces market risks
Japan could face challenges if it continues buying yen on a large scale.
Critics have warned that selling part of Japan’s substantial holdings of US Treasury securities to finance intervention could trigger a sell-off in US government debt and push Treasury yields higher.
Some analysts believe Washington’s willingness to coordinate with Tokyo may also be linked to concerns about rising Treasury yields. A continued decline in the yen could contribute to pressure on Japanese government bonds and broader financial markets.
“Both the US and Japan face risks of inflation turning hot and leaving their central banks behind the curve,” former BOJ official Nobuyasu Atago told Reuters. “They see merits in cooperating.”
Japanese authorities are also increasingly focused on domestic bond markets. Economy Minister Minoru Kiuchi said on Sunday that the government would strengthen communication with financial markets.
“It’s very important to maintain market trust in Japan’s fiscal sustainability,” Kiuchi said during a television programme.
The expected announcement from Katayama could provide further details on the scale and scope of the coordinated intervention, as Tokyo and Washington seek to prevent further sharp declines in the yen.
