US and Japan Unite Against Yen Speculators in Rare Exchange Rate Alignment

A joint effort by the US and Japan to combat speculative bets against the yen has been in the works for months, finally coming together last week. The move was a rare alignment of interests between Washington and Tokyo on exchange rates.

The need for action heightened when concern over Prime Minister Sanae Takaichi's expansionary fiscal and monetary stance drove the yen to recent lows, pushing up import prices and hurting the administration's approval ratings.

The US Treasury Secretary Scott Bessent's verbal support for a stronger yen has given bureaucrats in Tokyo a new tool in their fight against sharp yen selling. The shared currency anxiety has also added pressure on the Bank of Japan (BOJ) to persist with rate hikes.

Last week, the BOJ raised interest rates to a 31-year high of 1 percent, but the move failed to give a lasting boost to the sagging currency. However, markets now see the BOJ's September meeting as live, with some predicting a near-given rate hike.