Japan's Ministry of Finance and the US Treasury have confirmed they jointly intervened in currency markets over the weekend to support the Japanese yen, which recently hit a 40-year low against the US dollar.
Japan is thought to have sold $59 billion to buy yen, while Washington staged a smaller intervention – its first in Japan since 2011. The move sent the yen up 3.5% against the dollar, reversing months of depreciation.
US Treasury secretary Scott Bessent has shown markets there is “a new sheriff in town”, according to the Financial Times. One explanation for US involvement is that Donald Trump likes Japan, telling reporters: “Japan's been very good to us, with the exception, of course, of Pearl Harbor.”
Self-interest may also be a factor: Japan's sales of dollar assets, mainly US Treasuries, are raising US borrowing costs. The intervention is likely to halt, at least temporarily, a “disruptive further depreciation” of the yen, says Brad Setser of the Council on Foreign Relations.
However, some analysts warn the intervention may ultimately fail without higher Japanese interest rates. Japan's rates stand at 1%, far below those in America, but the country cannot afford to raise them due to government debt equivalent to 248% of GDP.