Tokyo and Washington Unite Against Disorderly Yen Moves

The yen has been under intense pressure in 2026, reaching multi-decade highs near 164 before reversing course. By early August, USD/JPY had pulled back to the mid-156s after coordinated intervention by Japanese authorities and an unusual involvement from the US Treasury.

This is not just another routine intervention episode; it's a response to a fundamental question: why are both Japan and the US determined to strengthen the yen when a weaker currency has long been seen as beneficial for exports?

The answer lies in the difference between a moderately competitive yen and an excessively weak one. A soft yen helps exporters, but a disorderly, weak yen poses significant risks, including imported inflation that can erode real incomes and complicate the Bank of Japan's normalization path.