The rare joint intervention sent the yen sharply higher and strengthened expectations that Japan's central bank could raise interest rates as early as September.
Japan and the United States have officially confirmed they carried out a coordinated intervention to support the Japanese yen, marking the first joint currency operation between the two countries since 2011. Officials also made it clear they are prepared to step in again if market conditions require it.
The move comes after the yen fell to its weakest level in 40 years, raising concerns about financial stability and inflation in Japan.
KEY DETAILS
Japan's Finance Ministry said Monday that Friday's joint yen-buying intervention with the U.S. Treasury was aimed at calming excessive volatility and disorderly moves in the currency market.
Finance Minister Satsuki Katayama said authorities "will not hesitate" to carry out further coordinated intervention if needed. President Donald Trump said the United States was supporting Japan as a gesture of friendship and to help protect the global economy.
The announcement lifted the yen more than 1% to 155.20 per U.S. dollar, its strongest level since early May. The currency had fallen to nearly 164 per dollar last month, its weakest level in four decades.
Japan's top currency official, Atsushi Mimura, said the government would continue coordinating closely with the Bank of Japan (BOJ) on currency policy.
U.S. Treasury Secretary Scott Bessent also confirmed Washington's participation and said the United States would be willing to join future interventions. He again encouraged the BOJ to continue raising interest rates.
The coordinated action has increased market expectations that the BOJ could deliver another rate hike at its September policy meeting after leaving rates unchanged last week while signaling room for further tightening.
Reflecting those expectations, Japan's two-year government bond yield briefly climbed to 1.545%, its highest level since 1995.
Japan has struggled for months to stop the yen's decline, which has pushed up import costs, fueled inflation, and weighed on household spending. Previous solo interventions and the BOJ's June rate increase to 1%, the highest in 31 years, failed to provide lasting support for the currency.
Before Friday's confirmed intervention, BOJ data suggested Japan may have spent as much as $58.97 billion buying yen in New York trading on Thursday.
Bessent also said the United States is considering expanding the Federal Reserve's repurchase facility, which provides temporary dollar liquidity. The facility could help Japan access dollars without selling U.S. Treasury holdings, making future interventions easier to finance.
MARKET REACTION
Currency markets responded immediately, with the yen posting its strongest gain in months. Bond markets also moved higher as traders increased bets on a September BOJ rate hike, pushing short-term Japanese government bond yields to levels not seen in three decades.
WHY IT MATTERS
The joint intervention sends a strong signal that both Tokyo and Washington are committed to limiting excessive currency swings. Even so, analysts say the main pressures weighing on the yen, including higher energy costs and the interest-rate gap between Japan and the United States, remain in place.
Markets will now focus on whether Japan and the United States intervene again and whether the Bank of Japan follows through with a rate hike in September. Those decisions could determine whether the yen's rebound continues or proves to be temporary.
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Source: Reuters
Time: 4:35 PM EEST
