US and Japan Unite to Support Yen in Largest Currency Intervention Ever

The US and Japan have jointly intervened in the currency market to support the yen, marking one of the largest interventions in history. On Thursday, Japanese authorities bought ¥8.45 trillion ($53 billion) worth of yen, causing the currency to surge by as much as 3.3% against the dollar.

The move was coordinated with the US Treasury Department, which reportedly sold euros to buy yen on behalf of the US government. This marks the first joint intervention by Washington and Tokyo in nearly 30 years, according to the Financial Times.

Misgivings about the effectiveness of currency interventions have been expressed by some analysts. Mike (Mish) Shedlock notes that Japan's central bank is trapped between runaway imported inflation and an unserviceable sovereign debt load. To avoid a potentially devastating impact on US Treasury yields, the US Treasury stepped in to manage the exchange rate.

Critics argue that this intervention will only provide temporary relief, as it fixes no fundamental problems. Shedlock points out that the Plaza Accord, a 1985 agreement aimed at weakening the US dollar, ultimately failed to achieve its goals and may be seen as a cautionary tale for future interventions.