The United States and Japan have initiated a rare joint effort to strengthen yen, marking an extraordinary and the first one coordination between the two countries since 2011.
The primary purpose of the recent currency intervention is to halt a slide in the yen, curbing excessive volatility and correcting its “substantial undervaluation” after it hit a fresh 40-year low.
Japan has struggled against an accelerating slide in the yen, which has approached 40-year lows. This decline has increased the cost of imported food and energy for businesses and consumers, placing pressure on Prime Minister Sanae Takaichi’s government.
There are various contributing factors responsible for the decline of yen, including investors selling the currency, low interest rates maintained by the Bank of Japan, high public debt exceeding 200 percent of GDP and energy shocks stemming from the Middle East conflict.
On Monday, Japan’s finance ministry said Friday’s coordination with the US Treasury Department “countered excessive volatility and disorderly movements in the Japanese yen in recent months”.
The “coordinated foreign exchange actions countered disorderly yen movements,” US Treasury Secretary Scott Bessent said.
“We strongly support Japan’s decisive market and monetary steps to correct the substantial undervaluation of the yen,” he added.
“They have a weakening yen, and they wanted a little bit of help. And we’re always there for Japan,” US President Donald Trump also told reporters on Sunday.
According to analysts, the Trump administration intervened partly to prevent Japan from selling off large quantities of US government bonds. Bank of Japan data also indicated Tokyo may have sold nearly $59 billion of US dollars to buy yen in New York markets.
Some analysts compare the move to previous US interventions supporting ideological allies, noting that Takaichi has advanced a pro-growth agenda, food tax cuts, and Japan’s largest military buildup since the Second World War, the latter of which has been welcomed by the Trump administration.
