US-Japan Currency Intervention Puts Market on High Alert

Currency traders are bracing for more joint intervention by Japan and the US after coordinated operations in Tokyo and New York last week triggered a dramatic rebound in the yen. The Finance Ministry and the US Treasury Department are working together to shore up the currency, with Finance Minister Satsuki Katayama set to announce that they are working in tandem.

The two governments' partnership has raised the stakes for those betting against the yen, which was quoted at 157.40 to the dollar on Friday, its strongest level since early May. The currency has been under pressure from rising oil prices and Japan's persistent budget deficits, as well as a yawning interest-rate gap with the US and other major economies.

The intervention last week came after more than two months of losses in the yen, using a combination of direct purchases in the market, calls by officials to banks that deal in the currency, and jawboning from Treasury Secretary Scott Bessent and Finance Minister Satsuki Katayama. Goldman Sachs Group Inc. strategists wrote that it seems likely authorities would intervene further if the yen begins to unwind its recent move.

The yen's depreciation has sounded alarm bells in Tokyo, with rising import costs squeezing businesses and consumers, and a failure to arrest the drop could have far-reaching implications globally.