US Backs Japan's Yen Defense Efforts Amid Ongoing Market Volatility
The US government has publicly backed Japan's efforts to support its currency, the yen. The two countries have jointly intervened in currency markets, briefly pulling the yen off its weakest levels in decades.
US Treasury Secretary Scott Bessent said Washington would do 'whatever it takes' after the joint intervention. This means that Japan can step into foreign-exchange markets and buy yen to slow a slide that makes imports pricier and can rattle confidence.
However, interventions usually only have a short-term impact, and the yen's biggest headwind remains its return gap with the US. When dollar interest rates are higher, it's easier for traders to borrow cheaply in yen and put money into higher-yielding dollar assets. This flow can resume once the initial shock fades.
The next big checkpoint for the yen will be the Bank of Japan's September 17th-18th meeting, where it may nudge interest rates higher. The Federal Reserve's September decision will also shape how wide the US-Japan gap stays.