US and Japan Join Forces to Combat Yen Speculation

The US and Japan have joined forces to combat speculation against the yen, a move that follows months of preparations between the two nations. According to Japanese Finance Minister Satsuki Katayama, she has held talks with US Treasury Secretary Scott Bessent about 10 times, including an online meeting in late June.

The shared concern over the weak yen is not new. Japan's top currency diplomat Atsushi Mimura has been working behind the scenes with US counterparts to address market headwinds. The need for action heightened in July when concern over Prime Minister Sanae Takaichi's expansionary fiscal and monetary stance drove the yen to recent lows.

The intervention campaign was closely coordinated with the Bank of Japan (BOJ), which raised interest rates to a 31-year high of 1 per cent last month. Bessent has verbally supported a stronger yen, giving bureaucrats in Tokyo a new tool in their fight against speculation.

Markets now see the BOJ's September meeting as live, with many predicting a rate hike to address the yen's weakness. As bond strategist Yuki Kimura said, 'Given Japan moved to prevent yen falls with the cooperation of the US, there's a question of whether the BOJ can afford to forgo raising rates in September.'