US and Japan Unite to Support Yen's Value Amid Record Low

In a significant move, Japan and the United States jointly intervened in the foreign exchange market to support the yen's value. The intervention came after the yen fell to its weakest level in nearly four decades, at 163.73 per dollar on July 30.

The coordinated action, carried out by Japan's Ministry of Finance and the US Treasury, was aimed at addressing excessive volatility and disorderly movements in the yen. According to officials involved in the negotiations, this move was the culmination of a five-year effort by Japan to bring Washington on board with currency intervention.

The US sold euros, not dollars, as part of the joint operation, which allowed it to achieve the desired outcome without disrupting its broader dollar posture. Japan also announced plans to use the Federal Reserve's Foreign and International Monetary Authorities repo facility going forward, which will help it obtain short-term dollars by pledging its holdings rather than selling US Treasury securities.

The intervention is not just about supporting Japan's economy but also about protecting the US trade position and preventing a widening trade deficit. Additionally, participating in joint intervention helps Washington to avoid a scenario where Japan repeatedly dumps Treasuries to defend the yen, which would push up US yields and borrowing costs.