US, Japan Unite Against Currency Volatility

The United States and Japan have formed a 'currency alliance', signaling deeper coordination on exchange-rate policy and potential joint intervention to stabilize the yen against the dollar.

This shift from traditional U.S. reluctance to engage in currency market intervention is driven by the yen's prolonged weakness, with the currency trading near multi-decade lows against the dollar as of late 2025.

The Bank of Japan has maintained an ultra-loose monetary policy, while the Federal Reserve has kept rates elevated, widening the interest-rate gap and fueling yen depreciation.