U.S., Japan Intervene to Boost Yen for First Time Since 1998 — 2nd Update

By P.R. Venkat and Ronnie Harui

The U.S. and Japan moved to arrest the yen's slide, with Tokyo confirming the first joint intervention to strengthen the currency for the first time since 1998.

Japan's Finance Minister Satsuki Katayama on Monday said that the Ministry of Finance and the U.S. Treasury Department intervened in markets to support the yen, which has been trending weaker and touched a 40-year low against the dollar late last month.

Katayama comments came a day after U.S. Treasury Scott Bessent said in his social-media post that "Friday's coordinated foreign-exchange actions countered disorderly yen movements." He also said that U.S. supported Japan's moves to correct the yen's "substantial undervaluation, and added that the authorities would not hesitate to participate in further joint intervention."

Katayama echoed this, saying the finance ministry was in close communication with the U.S. Treasury Department and wouldn't hesitate to intervene again with its U.S. counterpart.

The comments confirm what market observers had widely suspected--market intervention which powered the yen to as strong as 155.21 yen against the dollar on Monday, the highest intraday level since May 6, from near 164 yen late last week. The dollar was recently 0.6% lower at 156.58 yen, LSEG data showed.

Coordinated intervention by the U.S. and Japan is exceedingly rare. The last time they bought the yen in markets was in 1998, at the height of the Asian financial crisis. In 2011, they sold the yen to weaken it after the Fukushima earthquake and nuclear disaster.

The yen has been steadily depreciating this year, under pressure as investors flocked to the dollar amid escalating tensions in the Middle East and concerns over a widening U.S.-Japan interest-rate gap.

Expectations of a wide interest-rate differential--with the Federal Reserve looking hawkish even while the Bank of Japan kept rates on hold last week for fear of undermining economic growth--have only served to encourage bets against the yen.

Intervention could spur unwinding of yen short positions, which are speculative bets that the yen would weaken.

The "joint intervention is certainly historic and significant, and could certainly play an important role in the short-term in clearing out yen shorts," MUFG Bank's senior currency analyst Michael Wan said in a note.

But the yen's weakness is also caused by spending on costlier energy imports, relatively low foreign investments and concerns over Japan's fiscal spending. Prime Minister Sanae Takaichi has been keen to boost spending to help the economy but such efforts could weaken the yen as they may, in turn, lead to a worsening fiscal deficit in Japan.

Japan's "fundamentals likely still need to change for a more durable move lower in dollar/yen," Wan said. These include "still low real interest rates, and concerns by the market around the fiscal spending trajectory of government," he added.

More rounds of coordinated U.S.-Japan foreign exchange intervention could occur, HSBC Global Investment Research's Paul Mackel said.

"It is also possible that other central banks decide to join," the global head of FX Research said in a note. The European Central Bank "has been quiet so far on the matter, but if it were to intervene as well, this would look like an implicit currency accord to strengthen the yen," Mackel said. However, "doubts would persist on the sustainability of a yen recovery when the BoJ is measured at raising rates," Mackel said.

Write to P.R. Venkat at venkat.pr@wsj.com and Ronnie Harui at ronnie.harui@wsj.com

(END) Dow Jones Newswires

August 03, 2026 01:30 ET (05:30 GMT)