US and Japan Coordinate Joint Intervention to Defend Yen

The yen-dollar exchange rate hit its lowest level in about 40 years at 164 yen per dollar at the end of last month, prompting Japan's Ministry of Finance and the Bank of Japan to intervene by buying yen. This unusual move was followed by a joint foreign exchange market intervention by the U.S. Treasury Department and the Federal Reserve Bank of New York.

The trigger for this coordinated action was a handwritten note from Treasury Secretary Scott Bessent, which was captured on camera at a meeting of U.S. government ministers presided over by President Trump. The note read: 'Buy Japanese Yen (JPY) $5-10 bil,' sending a strong signal to speculative yen sellers in the foreign exchange market.

This is the first time in 28 years that the United States and Japan have directly intervened to defend the yen, with previous interventions taking place during the 1998 Asian financial crisis and the 2011 Great East Japan Earthquake. The current intervention aims to prevent a steep weakening of the yen, which has been driven by structural interests such as the U.S. government's enormous bond burden, a surge in 30-year interest rates, and Japan's huge sovereign debt.