US and Japan Unite Against Yen Speculators in Coordinated Intervention

A joint effort by the US and Japan to combat speculative bets against the yen was months in the making, involving rare alignment of interests between Washington and Tokyo.

The effort came after a four-decade low for the yen this year, with Japanese authorities seeking to address cost-of-living concerns caused by a weak currency. A US Treasury Secretary's verbal support for a stronger yen provided a new tool in Japan's fight against speculators.

The joint intervention campaign was closely coordinated with the Bank of Japan (BOJ), and used a speakerphone connected with a handful of staff at the finance ministry's foreign-exchange division to make buying decisions. After a BOJ news briefing, the yen spiked in what markets suspect may have been another bout of yen-buying intervention by Tokyo.

Washington joined Tokyo this time, with the US Treasury informing banks that it might intervene in the yen market and that they should 'stand ready for future action'. The BOJ's communication on its future rate plans nodded to a line in the US Treasury's currency report that 'monetary normalisation would help reduce excessive exchange rate volatility.'

The BOJ's September policy meeting is now seen as live, with some analysts predicting a near-given rate hike. Faster rate hikes are necessary to put a lasting floor on the yen, according to experts.