US and Japan Unite Against Yen Weakness

Recent intervention in the yen market by the US and Japan aims to counter speculative bets against the currency. The decision was preceded by months of preparation and coordination between the two governments, a rare public alignment on exchange-rate policy. Japanese officials had been seeking additional support for their efforts to counter yen weakness.

The weak yen has pushed up import costs and increased pressure on household living expenses in Japan. The US Treasury Secretary Scott Bessent's backing for a stronger yen provided Japanese officials with further support in their efforts. A weaker yen reduces the trade advantage expected from President Donald Trump's tariff policies, while a sell-off in Japanese government bonds could also affect US Treasury yields.

The shared concerns have led to closer discussions between the two countries on exchange rates and increased pressure on the Bank of Japan (BOJ) to continue raising interest rates. The BOJ raised interest rates to a 31-year high of 1% as part of its monetary policy normalisation, but deeply negative real borrowing costs meant the move did not provide lasting support for the yen.