US and Japan Join Forces to Prop Up Yen Amid Pressure from Oil Prices

The US and Japan have joined forces to prop up the Japanese yen (JPY), which has been under pressure from rising oil prices, budget deficits, and an interest-rate gap with major economies. The intervention is a coordinated effort between the two countries, with the US Treasury Secretary Scott Bessent indicating that he thinks the yen is 'very undervalued.'

Bessent's commitment to shoring up the yen was evident when Reuters published a photograph of his notepad at a cabinet meeting in Camp David, which included a 'To Do' item: 'Buy Japanese Yen (JPY) $5-10 bil.'

The market had been expecting another intervention, and the authorities delivered. On Friday, July 31, the yen was quoted at 157.40 to the US dollar and 122.7 to the Singapore dollar, its strongest levels since early May.

Michiyoshi Kato, a senior adviser in the currency and rates client team at Sumitomo Mitsui Trust Bank in Tokyo, noted that 'the market had underestimated the authorities.' He added that it has likely become more difficult for speculators to sell the yen, and if there is another intervention, the dollar-yen exchange rate will likely fall below 155 yen.