US and Japan Unite to Support Yen Amid Rising Pressure

Japan's Finance Ministry and the US Treasury Department have been working together to shore up the yen, raising the stakes for anyone betting against it. The two governments conducted coordinated yen-buying intervention on July 31, which triggered a dramatic rebound in the currency.

The move is aimed at addressing recent 'excessive volatility and disorderly movements' in the yen, according to Finance Minister Satsuki Katayama. US Treasury Secretary Scott Bessent has urged that a US Treasury backstop for foreign central banks and monetary authorities be 'upsized', and he has signalled indirect but forcefully via the media.

The yen edged higher in thin trading on Monday, with markets on high alert for more joint intervention by Japan and the US. Goldman Sachs strategists have noted that while many in the market question the capacity of authorities to change the long-term trajectory of the yen, there is no doubt of their power in short bursts.

The currency has been under pressure from rising oil prices, Japan's persistent budget deficits, and a yawning interest rate gap with the US and other major economies. The depreciation has sounded alarm bells in Tokyo, with rising import costs squeezing businesses and consumers.