Japan, US confirm joint yen-buying intervention, signal more action

Japan and the US conducted a rare coordinated yen-buying intervention, spending up to $36.58 billion, to halt the yen's slide to 40-year lows and prevent global market spillovers.

​Japan and the United States conducted coordinated yen-buying intervention and will not hesitate to take further action, Japan's finance ministry said on Monday, confirming a rare bilateral action to halt the yen's slide to fresh 40-year lows.

The intervention on Friday underscored both countries' resolve to prevent a selloff in the yen and Japanese government bonds (JGBs) from causing global spillovers, such as adding upward pressure on already rising U.S. Treasury yields, analysts said. The joint ‌intervention was the first since 2011's coordinated action to weaken the yen following the devastating earthquake in eastern Japan.

Central bank data indicated on Monday that Japan may have spent as much as $36.58 billion buying yen during Friday's joint intervention. The U.S. Treasury sold euros to buy yen, three sources familiar with the matter said, though the amount spent was not known.

President Donald Trump said on Sunday the United States was helping Japan prop up the yen as a sign of friendship and to help the world economy. Aside from helping Japan as a strategic ally in Asia, the intervention would help the United ‌States address concerns over extraordinary weakness in the yen that offsets the boost from Trump's tariffs, analysts say.

In the statement, Japan's finance ministry said Friday's yen-buying intervention with the U.S. Treasury Department "countered excessive volatility and disorderly movements in the Japanese yen in recent months". "We will not ‌hesitate conducting further coordinated intervention," Finance Minister Satsuki Katayama told reporters on Monday.

The yen surged more than 1% to 155.20 per dollar after the announcement, its strongest since early May and well off the 40-year low near 164 hit last month, as traders remained on alert for more intervention. It was trading around 157 per dollar late on Monday. Katayama declined to comment when reporters asked whether the authorities stepped in on Monday.

BOJ IN SPOTLIGHT "The joint intervention is the culmination of Japan's alliance with the United States," Japan's top currency diplomat Atsushi Mimura told reporters on Monday.

"We will continue to align (currency policy) with the Bank of Japan's monetary policy," he said, suggesting the government will work hand in hand with the ⁠central bank in ​arresting yen falls. U.S. Treasury Secretary Scott Bessent also confirmed Friday's effort, adding Washington "will not ⁠hesitate to participate in further joint intervention."

"We strongly support Japan's decisive market and monetary steps to correct the substantial undervaluation of the yen," Bessent said in a separate statement on X, repeating his calls for further interest-rate hikes by the BOJ. The remarks put the spotlight on the BOJ, which last week kept rates on hold but signalled scope for ⁠a rate hike as soon as its next policy meeting in September.

"The comments by Mimura and Bessent must be music to the ears of hawks within the BOJ," said Naomi Muguruma, chief bond strategist at Mitsubishi UFJ Morgan Stanley Securities. "I feel like a September rate hike is a done deal. It won't make sense ​for the BOJ to wait until October and cause another bout of yen declines."

The two-year JGB yield, which is most sensitive to near-term monetary policy moves, briefly hit 1.545% on Monday, the highest since 1995, as markets priced in the chance of an ⁠early rate hike. FED FACILITY AVAILABLE

Japan has been struggling to curb a relentless drop in the yen that pushes up import prices and stokes broader inflation, hitting households' wallets and Prime Minister Sanae Takaichi's public approval ratings. Tokyo's solo intervention conducted between late April and early May caused only a brief yen rebound. The BOJ's June rate hike to a 31-year high of ⁠1% ​also gave the struggling currency little lasting boost.

Friday's joint intervention followed Tokyo's solo intervention worth up to $58.97 billion in New York markets a day earlier. In a sign of further Japan-U.S. coordination, Bessent said the United States would consider increasing in coming months the size of the Federal Reserve's repurchase facility providing temporary dollar liquidity, calling the tool an "important backstop".

The comment followed the Japanese finance ministry's rare X post on Saturday that it had "a broad range of tools to address market liquidity needs," including access to the Fed's repurchase facility providing temporary dollar liquidity. The Fed facility, introduced in 2020 ⁠to steady markets during the COVID-19 pandemic, allows Japan to raise dollar liquidity without outright sales of U.S. Treasuries, potentially easing funding pressures on Tokyo for intervention.

Still, the facility is "unlikely to change perceptions about the limits of Japan's intervention capacity, as borrowing is capped by the amount ⁠of Treasury holdings pledged as collateral," said Rinto Maruyama, FX and rates strategist ⁠at SMBC Nikko Securities. Some analysts doubt whether the latest round of action could counter structural factors driving down the yen, such as the rising cost of fuel from the Middle East conflict and the still wide Japan-U.S. interest rate differentials.

"The announcement effect of joint intervention is much bigger than solo action by Japan," said Tsuyoshi Ueno, a senior economist at NLI Research Institute. "But the fundamentals driving yen weakness haven't changed, so we ‌likely won't see one-sided yen rises from this intervention."