US and Japan Unite to Boost Yen in Rare Joint Intervention

The US Treasury and Japan have made a rare joint move to stabilize the yen by buying it in the open market. The intervention, which took place on August 1, involved selling euros rather than dollars, allowing the Treasury to strengthen the yen without weakening its own currency.

The Bank of Japan has maintained an extremely loose monetary policy for years, while the Federal Reserve and European Central Bank pushed interest rates higher. This divergence created a carry trade dynamic that drove investors to borrow cheaply in yen and invest in higher-yielding dollar or euro assets, pushing the yen to historic lows.

By choosing not to sell dollars, Treasury Secretary Scott Bessent implicitly signaled his desire to maintain dollar strength without actively undermining it. Japanese officials warned that further action could follow if currency volatility persists, which could create more volatility spikes in crypto markets that have historically correlated with sudden yen moves.