U.S. and Japan Confirm Rare Joint Intervention to Prop Up the Yen

Today’s Focus

The Japanese yen climbed to ¥155 against the U.S. dollar on Monday, its strongest level since early May, after Tokyo and Washington confirmed they conducted a joint currency intervention late last week, according to The Guardian and Reuters reporting summarized by AP News.

Japan’s finance ministry said the two governments carried out coordinated yen-buying and would “not hesitate” to act again. The intervention followed a slide to nearly ¥164 to the dollar last week, a 40-year low.

President Donald Trump told reporters Sunday that Japan asked for help. “They have a weakening yen, and they wanted a little bit of help. And we’re always there for Japan,” he said, according to The Guardian.

Treasury Secretary Scott Bessent said Washington “will not hesitate to participate in further joint intervention,” while repeating calls for the Bank of Japan to keep raising interest rates. A photograph of Bessent’s notebook, taken Saturday, appeared to reveal parts of the coordinated plan before it was formally announced, The Guardian reported.

The yen has been under pressure for months. Japanese borrowing costs remain lower than in other advanced economies, fueling a “carry trade” in which investors borrow cheaply in yen to buy higher-yielding dollar assets.

Investors have also reacted to Prime Minister Sanae Takaichi’s push for tax cuts and new spending to stimulate growth, and to her public criticism of the Bank of Japan’s rate increases, according to The Guardian.

Joint U.S.-Japan currency operations are rare. The last confirmed coordinated intervention involving the two governments was in 2011, following the Fukushima disaster, when the G7 acted together to weaken a surging yen. Monday’s operation runs in the opposite direction: buying yen to strengthen it.

The Debate

Supporters argue

Backers of the intervention say a disorderly yen collapse threatened both economies and required a coordinated response. Bessent framed the move as insurance against speculative pressure, saying Washington would act again if needed, according to Reuters.

Trump described the step as routine assistance to a treaty ally. “We’re always there for Japan,” he said, per The Guardian. Supporters point to Japan’s status as the largest foreign holder of U.S. Treasuries as reason enough for Washington to help stabilize the yen when Tokyo requests it.

Japanese officials argue the intervention targets speculators, not fundamentals. Finance Minister officials cited by Reuters said the carry trade had produced “excessive” and “one-sided” moves that hurt Japanese households through higher import prices, particularly for energy and food.

Conservative commentators sympathetic to Prime Minister Takaichi’s growth agenda contend the operation buys her government time to pass stimulus measures without a currency panic. They note the yen strengthened roughly nine points against the dollar in days, suggesting the intervention worked, at least in the short term.

Critics argue

Critics say the intervention papers over a policy conflict between Takaichi’s fiscal stimulus and the Bank of Japan’s tightening cycle, and that no amount of dollar-selling can fix that. Analysts quoted by AP News said interventions historically produce only temporary relief when underlying rate differentials remain wide.

Some U.S. lawmakers question why the Treasury is spending reserves to support a foreign currency. On the left, progressive economists argue the move mainly rescues carry-trade investors and Japanese exporters, not ordinary workers on either side of the Pacific.

Free-market conservatives push back on the precedent. Editorial writers at outlets including the Wall Street Journal have long argued that currency intervention distorts markets and invites retaliation, particularly when paired with tariff threats.

Critics also seized on the leaked notebook photograph. They contend that publicizing intervention plans, even accidentally, undermines the element of surprise central to such operations and raises questions about operational discipline at the Treasury.

What the experts say

Currency interventions tend to work only when they align with monetary policy, according to research from the Peterson Institute for International Economics. A 2019 Peterson study of past Japanese interventions found sustained effects were rare unless the Bank of Japan simultaneously shifted rates.

Adam Posen, the institute’s president and a former Bank of England policymaker, has argued in past commentary that Japan’s currency weakness reflects real interest-rate gaps that intervention alone cannot close. The International Monetary Fund’s 2024 Article IV report on Japan reached a similar conclusion, urging Tokyo to rely primarily on monetary and fiscal tools rather than foreign-exchange operations.

Historical data compiled by the Federal Reserve Bank of St. Louis show the U.S. has intervened in currency markets only a handful of times since 1995, and joint operations with Japan are rarer still. The 2011 G7 action following Japan’s earthquake is the most recent comparable case.

Brad Setser of the Council on Foreign Relations noted on his blog last week that the size and durability of any yen rebound will depend more on Bank of Japan Governor Kazuo Ueda’s next rate decision than on further Treasury purchases.

By the Numbers

¥155: the yen’s level against the dollar on Monday, its strongest since early May, per The Guardian.
¥164: the 40-year low the yen touched last week before the intervention, according to The Guardian.
$1.1 trillion: Japan’s holdings of U.S. Treasury securities as of the most recent Treasury International Capital report, making it the largest foreign holder.
2011: the last time the U.S. and Japan conducted a confirmed joint currency intervention, part of a G7 response to the Fukushima disaster, per Federal Reserve historical records.
0.75%: the Bank of Japan’s current policy rate after recent hikes, still well below the Federal Reserve’s target range, according to Reuters.
9 yen: the approximate move in the currency’s favor within days of the intervention, based on Guardian and AP figures.