US and Japan Unite to Save Yen from Record Lows
The US and Japan have intervened in the foreign exchange market for the first time in 15 years to support the Japanese Yen, which had fallen to its lowest level since 1986 against the US dollar.
The intervention came as both countries face rising borrowing costs. The 30-year bond yield in the US is at its highest level since 2007, and German bond yields rose to their highest level since 2011 last week.
The Bank of Japan spent a record $53.3 billion in a single day to buy its own currency, while the New York Fed sold euros to purchase yen. This joint operation is the first since 1998 and marks a reversal of the two countries' previous actions after the 2011 earthquake.
The US Treasury's intervention aims to prevent Japan from dumping large quantities of US treasuries on the market, which could have severe consequences for global bond markets. The Bank of Japan has indicated that it plans to use the Fed's FIMA repo facility for future interventions, allowing foreign central banks to obtain liquidity in US dollars without selling treasuries.
US Treasury Secretary Scott Bessent stated that the Yen is 'substantially undervalued,' and President Donald Trump said the US helped Japan out of friendship. However, experts warn that intervention can only buy time and will not change the long-term trajectory.