US and Japan Join Forces to Strengthen Yen in Coordinated Intervention

Last week, the US and Japan coordinated an intervention in the foreign exchange market to support the Japanese yen. The move was aimed at causing a orderly appreciation of the yen.

The last time the US intervened to support the yen was in 1998, while the last coordinated operation between the two countries occurred in 2011. This time, however, the goal was different - to strengthen the yen rather than weaken it.

Japan has been intervening on its own since 2022, but with only temporary success. The participation of the US signals that a falling yen is now considered a global financial risk.

A carry trade, estimated at around $250 billion, has also been a major factor in the yen's weakness. This involves investors borrowing cheap yen to buy higher-yielding assets such as US Treasury bonds, corporate bonds, emerging market debt, commodities, and currencies.