U.S. President Donald Trump, Treasury Secretary Scott Vessen, and Japan's Finance Minister Satsuki Katayama have confirmed a coordinated currency intervention between the U.S. and Japan. They expressed a strong commitment to defend the yen and indicated that further joint interventions are possible.
In a statement, Katayama announced that the two countries conducted a yen-buying intervention in the New York foreign exchange market on July 31. He explained, "We responded to the excessive fluctuations and disorderly movements of the yen recently." He added, "We will not hesitate to engage in further coordinated interventions," suggesting the possibility of additional actions. The U.S. and Japan are also coordinating a joint statement.
Earlier, on August 2, Trump told reporters that the intervention was conducted because the U.S. has a "good relationship" with Japan. Vessen emphasized on social media platform X (formerly Twitter) that the coordinated action taken on Friday was in response to the yen's disorderly movements, stating, "Economic security is national security, and the U.S.-Japan alliance is built on these two foundations." He further noted, "We will not hesitate to participate in additional joint interventions if necessary."
On July 31, Vessen had also expressed on X his anticipation of meeting Bank of Japan Governor Kazuo Ueda at the G20 finance ministers and central bank governors meeting at the end of August. On that day, the yen-dollar exchange rate briefly fell to 157.20 yen per dollar, marking its lowest level in over two and a half months. This marks the first coordinated intervention by the two countries in the foreign exchange market since 2011, and the first yen-buying intervention since the Asian financial crisis in 1998.
Previously, the Yomiuri Shimbun reported on August 2 that U.S. and Japanese monetary authorities had engaged in a yen-buying intervention in the New York foreign exchange market on July 31. The Japanese government and the Bank of Japan intervened for two consecutive days following July 30. The U.S. monetary authorities conducted a "rate check" on financial institutions on July 30 to inquire about the exchange rate levels, and on July 31, they notified several banks of the possibility of intervention and requested preparations. According to the Financial Times, the U.S. Treasury's intervention on July 31 was carried out through Goldman Sachs and Morgan Stanley via the New York Federal Reserve.
Reuters reported that a note on Vessen's desk during a cabinet meeting indicated a potential purchase of 5 to 10 billion dollars (approximately 7.17 trillion to 14.33 trillion won) in Japanese yen. The Nikkei reported that during the series of interventions on July 30 and 31, U.S. authorities intervened in the market by selling euros to buy yen.
Coordinated interventions involve the monetary authorities of two or more countries intervening in the market simultaneously, which is considered to have a greater stabilizing effect on exchange rates than unilateral interventions. Historically, such interventions have been limited to exceptional circumstances like financial crises or major disasters. The U.S. and Japan intervened in 1995 to prevent a surge in the yen following the Great Hanshin Earthquake, and in 1998 during the Asian financial crisis, they conducted yen-buying interventions. The recent coordinated intervention during a period of yen depreciation is seen as unusual.
U.S. and Japan Confirm Intervention Principles from Last September
According to the Yomiuri, the two countries' finance authorities have been engaged in prolonged behind-the-scenes discussions. The foundation for this was a joint statement by the U.S. and Japan's finance ministers announced last September, which confirmed that foreign exchange market interventions should be limited to addressing excessive fluctuations or disorderly movements.
The Nikkei interpreted this statement as effectively permitting Japan's yen-buying interventions. The U.S. Treasury's currency policy report released last month stated that "excessive fluctuations are undesirable" regarding the yen, which analysts believe laid the groundwork for the recent coordinated intervention.
According to the Yomiuri, the U.S. conducted a rate check on financial institutions in January to curb speculative selling of the yen. With the U.S. effectively permitting Japan's interventions, the Japanese government and the Bank of Japan conducted a unilateral yen-buying and dollar-selling intervention on April 30 for the first time in one year and nine months, and have continued to intervene intermittently since then. Discussions on coordinated interventions reportedly intensified following a meeting between Katayama and Vessen on May 12. However, the trend of yen selling did not stop, and the yen-dollar exchange rate reached 163.90 yen per dollar in July, marking the lowest level for the yen in 39 years and 8 months.
The interests of both countries also aligned. Japan needs to curb rising import prices due to yen depreciation. The Trump administration is wary of the impact of a strong dollar on the competitiveness of U.S. manufacturing exports. A Japanese finance ministry official told the Nikkei, "The U.S. sees that Japan's exports becoming more favorable could harm the U.S. economy." Concerns that yen depreciation could offset the effects of high tariffs, a key policy of the Trump administration, have led the U.S. to engage in yen-buying interventions.
Analysts from the Yomiuri suggest that the U.S. also aims to suppress rising long-term interest rates. Japan is the largest foreign holder of U.S. Treasury bonds, and if Japan sells a significant amount of U.S. Treasuries to fund its intervention, it could lead to an increase in U.S. long-term interest rates. The Nikkei reported that the U.S. was aware that a simultaneous decline in the yen and Japanese government bonds could lead to a sell-off of U.S. Treasuries, resulting in rising interest rates. With the midterm elections approaching in November, the Trump administration has reasons to avoid rising long-term rates that could affect mortgage rates.
However, it remains uncertain whether this intervention alone will reverse the trend of yen depreciation. With expectations of further interest rate hikes in the U.S. growing, many believe that the interest rate gap between the U.S. and Japan will not narrow. The cautious stance of the Takaiichi administration regarding interest rate hikes, concerns over active fiscal measures such as consumption tax cuts, and structural factors such as Japan's trade deficit and increased investments in overseas equity funds through the new NISA (small investment tax exemption system) are also seen as supporting yen selling pressure. Takahide Kiuchi, an economist at Nomura Research Institute, stated to the Yomiuri, "The effects of the intervention are likely to be temporary, and there is a possibility that we will return to pre-intervention levels within the next few weeks."
* This article has been translated by AI.
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