US and Japan Form Currency Alliance to Stabilize Yen Against Dollar
The United States and Japan have formed a 'currency alliance' aimed at stabilizing the yen against the dollar. The development reflects a shift in U.S. policy, as officials now engage in more explicit dialogue on exchange-rate volatility.
The primary driver of this alliance is the yen's prolonged weakness, which has pushed Japanese import costs higher and strained households and small businesses. As of late 2025, the yen traded near multi-decade lows against the dollar, fueling concerns about extreme currency swings.
The 'currency alliance' includes enhanced communication between U.S. Treasury and Japan's Ministry of Finance, including on exchange-rate policies. The two nations have also agreed to coordinate on intervention, with a clearer framework for when Japan might intervene, potentially with U.S. understanding or tacit support.