The operation marks the first time Japan and the United States have acted together in foreign exchange markets since 2011, when Group of Seven nations moved to curb yen strength after the Tohoku earthquake. This time the direction is reversed — both sides are buying yen and selling dollars to lift a currency that has hit its weakest level against the dollar since 1986.
Scope Of The Joint Yen Intervention
Japan bought yen for dollars during New York trading hours on Thursday, according to a market source, with Bank of Japan data suggesting authorities sold as much as $58.97 billion to support the currency. The action came hours before the BOJ’s policy decision on Friday, where the central bank held rates steady while signaling a strong likelihood of near-term tightening.
Shortly after BOJ Governor Kazuo Ueda addressed reporters, the yen spiked in a move markets suspect was a second round of yen-buying by Tokyo. One Japanese government official, asked whether Katayama would confirm “joint action,” told Reuters yes, adding: “The operation is still ongoing.”
On Friday, the U.S. Treasury informed several banks that it might intervene in the yen market and instructed them to “stand ready for future action,” a source familiar with the matter said. Treasury Secretary Scott Bessent, who last week described the yen as “very undervalued,” was photographed at a Friday cabinet meeting with a notepad reading “To Do” followed by “Buy Japanese Yen (JPY) $5-10 bil.”
Coordination Between MOF And BOJ
Katayama’s top currency diplomat, Atsushi Mimura, signaled tight alignment between the fiscal and monetary authorities. “Going forward, as the official responsible for currency policy, I would like to respond in close coordination with monetary policy,” Mimura told reporters after Friday’s yen spike.
The widening interest rate differential between the U.S. and Japan has been the central driver of the yen’s decline. The Federal Reserve has shifted to a more hawkish posture, while the BOJ has moved only gradually toward normalization. Joint intervention effectively buys Tokyo time to close that gap without relying solely on rate moves.
Why Washington Joined In
The U.S. role is unusual. Washington has historically preferred to let markets set exchange rates and rarely participates in currency intervention. Analysts see this week’s cooperation as driven partly by American concern over rising Treasury yields.
A sustained yen selloff could force Japan to liquidate portions of its vast Treasury holdings to fund further intervention, pressuring U.S. debt prices and pushing yields higher. By joining the operation, Washington reduces the odds of that scenario and limits spillover into the U.S. bond market.
In a rare English-language post on X, Japan’s Ministry of Finance said it had “a broad range of tools to address market liquidity needs,” including access to the Federal Reserve’s repurchase facility for temporary dollar liquidity. That facility, introduced in 2020 during the COVID-19 pandemic, allows Japan to raise dollars without outright Treasury sales — easing funding pressure on Tokyo and protecting U.S. debt markets simultaneously.
Inflation Risks On Both Sides
Former BOJ official Nobuyasu Atago framed the cooperation as a shared inflation hedge. “Both the U.S. and Japan face risks of inflation turning hot and leaving their central banks behind the curve,” he told Reuters. “They see merits in cooperating.”
A sharply weaker yen raises import costs in Japan, complicating the BOJ’s effort to manage inflation expectations. In the U.S., a disorderly dollar could tighten financial conditions in ways the Fed does not fully control. Joint action addresses both risks at once.
Japan’s concern extends to its own bond market. Economy Minister Minoru Kiuchi said Sunday the government will step up communication with markets to preserve confidence in fiscal sustainability. “It’s very important to maintain market trust in Japan’s fiscal sustainability,” Kiuchi said on a television program.
What Happens Next
Katayama’s Monday announcement will be the first official confirmation of the joint operation, though markets have already priced in much of the action. The key question is durability: unilateral yen intervention has a mixed track record, and the currency’s long-term trajectory still hinges on the U.S.-Japan rate differential.
Watch for the BOJ’s next policy move. If the central bank raises rates sooner than markets expect, the yen’s recovery could extend without further intervention. If it hesitates, Tokyo and Washington may need a second round of coordinated buying — a politically fraught step for both governments.
Bessent’s visible involvement also raises the stakes for U.S. trade and currency policy. Any further Treasury participation would signal a break from the strong-dollar orthodoxy of recent decades and could reshape expectations for how Washington handles future currency disputes.
— Nadia Okonkwo, business desk, AXO News