BOJ Rate Hike Triggers Rare US-Japan Intervention

The Bank of Japan's (BOJ) decision to hike interest rates in September was the decisive factor behind the first coordinated intervention between Japan and the US in 28 years, according to testimony from Japanese government officials.

At a press conference on July 31, BOJ Governor Kazuo Ueda suggested an early rate hike starting in September or later, which provided the final impetus for the extraordinary coordinated intervention.

The US side praised Ueda's explicit statement that 'we will accelerate the pace of rate hikes if necessary,' and was concerned over the global spillover risks posed by Japan's delayed rate hikes, particularly excessive yen weakness that could destabilize global financial markets.

U.S. Treasury Secretary Scott Bessent was particularly troubled by the possibility that rising Japanese long-term rates could push up US yields and cool the American economy, ahead of this fall's midterm elections.