US and Japan Team Up to Stabilize Slumping Yen
US and Japanese authorities have jointly intervened in foreign exchange markets for the first time since 2011 to prop up the yen. The rare coordinated effort aims to stabilize the currency, which had weakened to a fresh 40-year low.
The joint intervention is in response to Japan's struggling economy, including its much lower central bank interest rates than other major economies like the US. Japan's main rate has been at 1% since June, while the US Federal Reserve's benchmark rate ranges from 3.50% to 3.75%. This makes the Japanese currency less attractive to international investors.
According to Bank of Japan data, Tokyo may have sold almost $59bn of US dollars to buy yen when it intervened in New York markets on Thursday. The US has not confirmed the size of its intervention but a Reuters photograph of a notepad in front of Bessent during a cabinet meeting read: 'To Do: Buy Japanese Yen $5-10 bil.'
Both countries have vowed to continue intervening 'intermittently in a coordinated manner for some time' if needed. Shigeto Nagai, head of Japan economics at Oxford Economics, believes that even small interventions can be effective in deterring speculators.