The United States and Japan have intervened in the foreign exchange market to defend the yen's value for the first time in nearly 28 years. President Donald Trump and U.S. Treasury Secretary Scott Vessenet emphasized their commitment to supporting Japan, leaving the door open for further interventions.
On August 2, Trump spoke to reporters aboard Air Force One while returning to Washington, D.C., from Bedminster, New Jersey, stating that the intervention was a result of the "good relationship" with Japan and the need to curb the yen's decline.
"Japan wanted a little help, and we will always be there for Japan," Trump said, adding that the action was primarily a signal of their friendly relations.
When asked what the U.S. hoped to gain from the intervention, Trump replied, "monetary benefits," citing a currency swap agreement between the U.S. and Argentina last year that he claimed yielded $25 billion in profits.
The Japanese Ministry of Finance also announced that it had conducted a market intervention on July 31, buying yen and selling dollars in coordination with U.S. authorities.
This marks the first joint intervention by the U.S. and Japan since shortly after the 2011 Great East Japan Earthquake, when they sold yen to prevent a rapid appreciation. The current yen-buying intervention is the first since the 1998 Asian financial crisis.
Recently, the yen has approached 164 yen per dollar, reaching its weakest level in nearly 40 years. The scale of Japan's intervention is estimated to be between 6 trillion and 7 trillion yen (approximately $55 billion to $64 billion). Following the intervention, the yen appreciated by about 10 yen against the dollar from its pre-intervention low.
Secretary Vessenet confirmed the joint intervention via social media, stating, "Economic security is national security, and the U.S.-Japan alliance is based on both." He described the recent market action as a response to the yen's disorderly movements.
Vessenet emphasized that the U.S. Treasury is in close communication with the Japanese Ministry of Finance and the Bank of Japan, stating, "We will not hesitate to participate in further joint interventions."
He also highlighted the importance of the Foreign and International Monetary Authorities Repo Facility (FIMA Repo Facility) as a crucial safety net, suggesting that support levels may need to be increased in the coming months. This facility allows foreign central banks to use U.S. Treasury securities as collateral to obtain dollars from the Federal Reserve.
Additionally, Vessenet expressed support for Japan's market stabilization measures and monetary policy responses, noting that the yen is significantly undervalued.
However, experts believe that the intervention is unlikely to reverse the yen's downward trend but may only slow its decline. A recent survey by Nikkei QUICK News found that most foreign exchange experts expect the effects of the intervention to last 1 to 2 months, with the yen potentially rising back to the 160 yen range against the dollar.
Junichi Ishikawa, chief market analyst at IG Securities, noted that while there may be short-term yen appreciation and dollar depreciation due to caution over further interventions, the trend of yen weakness is unlikely to reverse given the U.S.-Japan interest rate differential and expectations of U.S. rate hikes.
Experts predict that the yen's trajectory will be influenced by U.S. and Japanese monetary policies after September. If the Bank of Japan maintains a cautious stance on rate hikes while U.S. rate hike expectations persist, the yen may weaken again. Conversely, if further interventions or hawkish signals from the Bank of Japan emerge, the yen could rebound to levels between 151 and 153 yen per dollar.
* This article has been translated by AI.
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