Japan and US Join Forces to Prop Up Yen Amidst Extraordinary Weakness

The Japanese yen held its gains on Monday after Japan and the US conducted a joint intervention to prop up the currency, which has been experiencing extraordinary weakness. The rare joint intervention was announced by Japan's finance ministry and US Treasury Secretary Scott Bessent, with the goal of preventing a selloff in the yen and Japanese government bonds from causing global spillovers.

The intervention on Friday saw Japan spend as much as $36.58 billion buying yen, while the US sold euros to buy yen, according to three sources familiar with the matter. The Treasury spokesperson did not respond to requests for further information on the joint operation, which utilized a COVID-19 era Federal Reserve backstop.

The yen surged over 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. However, some analysts said that the impact of Japan's recent interventions has been short-lived, causing only a brief rebound in the yen.

Mark Sobel, a former longtime Treasury official, stated that intervention cannot solve Japan's difficult economic fundamentals, including a large debt load and overly accommodative monetary policy. 'If Japan wants a higher yen, it needs to address the monetary and fiscal policy concerns,' he said.