Japan and the U.S. Unveil Special Plan to Support the Yen
According to Sedaye Sama News Agency, citing Al Jazeera, Japan’s Finance Minister Satsuki Katayama is expected to issue a joint statement today with Washington outlining coordinated measures in the foreign exchange market aimed at preventing further depreciation of the Japanese yen.
According to Bloomberg, citing a source familiar with the matter, the statement is still being finalized. Meanwhile, Japan has intensified discussions with market participants to strengthen investor confidence in the country’s economic growth strategy.
Reuters, citing two Japanese officials, reported that Katayama will announce on Monday that Tokyo and Washington jointly intervened in the foreign exchange market to prevent the yen from falling to its weakest level in 40 years.
The officials added that Katayama is expected to reaffirm both countries’ commitment to countering excessive depreciation of the yen.
Last Friday, Japanese authorities purchased yen and sold U.S. dollars during New York trading hours after the dollar had climbed to around 164 yen, its highest level since 1986, increasing pressure on Tokyo to intervene.
The Financial Times also reported that the U.S. Treasury Department took the unusual step of purchasing yen to support Japan’s currency. According to the report, the Federal Reserve Bank of New York, acting on behalf of the Treasury, sold euros and bought yen through Goldman Sachs and Morgan Stanley, although the size of the transactions was not disclosed.
Reuters also reported that the U.S. Treasury informed several banks on Friday about the possibility of intervention and instructed them to prepare for further operations.
This marks the first direct U.S. intervention in support of the yen since 2011, when the G7 countries coordinated efforts following Japan’s devastating earthquake and tsunami.
Following reports of the intervention, the yen strengthened, with the dollar falling from around 158.9 yen to approximately 157.6 yen before the close of U.S. trading.
Japan’s Ministry of Finance stated that it has various tools available to provide liquidity and maintain market stability, including access to the Federal Reserve’s foreign and international monetary authorities Repo Facility, introduced in 2020 during the COVID-19 pandemic.
The facility allows Japan to obtain U.S. dollar liquidity without selling its holdings of U.S. Treasury securities, helping reduce financial pressure associated with supporting the yen.
Some analysts warn that Japan could eventually face limits in defending its currency, as selling large amounts of U.S. Treasury bonds could push Treasury yields higher. Others believe the coordinated action reflects Washington’s growing concern over rising U.S. bond yields and broader financial market stability.
Former Bank of Japan official Nobuyasu Atago told Reuters that both the United States and Japan face accelerating inflation risks and see closer policy coordination as mutually beneficial.
