U.S. and Japan Confirm Coordinated Yen-Buying Intervention, First Joint Action of Its Kind Since 1998
The Facts
- Japan's Ministry of Finance and U.S. Treasury Secretary Scott Bessent confirmed on Aug. 3 that the two governments conducted coordinated yen-buying intervention the previous Friday and said they would not hesitate to act again.
- It was the first joint U.S.-Japan intervention to strengthen the yen since 1998, during the Asian financial crisis; the last coordinated action of any kind was in 2011, when the two sides acted to weaken the yen after Japan's earthquake.
- The yen had fallen to about a 40-year low near 163-164 per dollar before strengthening roughly 5% over three sessions, touching 155.20 per dollar and then trading back near 156-157.
- Bank of Japan data indicated Tokyo may have spent as much as $36.58 billion in the operation, bringing its total spending on foreign exchange intervention this year to more than $100 billion.
- U.S. participation was motivated in part by concern that a selloff in the yen and Japanese government bonds could add upward pressure on U.S. Treasury yields; Japan holds close to $3 trillion in U.S. Treasuries, stocks and other assets.
- Rather than selling dollars, the U.S. Treasury reportedly bought yen by selling euros, a structure analysts at HSBC described as highly unusual and possibly unprecedented.
- Access to the Federal Reserve's repurchase facility lets Japan raise dollar liquidity for intervention without selling down its U.S. Treasury holdings, which critics had warned could itself push U.S. yields higher.
- Analysts say the durability of the yen's rebound depends on Bank of Japan policy rather than intervention alone, with markets anticipating a further rate increase in September after the BOJ lifted rates to a multi-decade high.
- Previous unilateral Japanese interventions, including roughly $70 billion spent in late April and early May and earlier operations in 2022 and 2024, produced only short-lived rebounds.
Context
Why would the United States want a stronger Japanese yen?
A weak yen and pressure on Japanese government bonds risk spilling into U.S. markets: if Tokyo funded currency support by selling its large stockpile of U.S. Treasuries, it could push American borrowing costs higher Aol,CNBC,NYT. Japan's nearly $3 trillion in U.S. Treasuries, equities and other assets means financial turmoil in Japan can ripple through U.S. markets NYT. Analysts also read Washington's involvement as support for an ally whose cost-of-living problems have been worsened by import prices under a weak currency Straits Times,NYT.
What is the yen carry trade, and why does intervention matter for it?
Investors have borrowed cheaply in yen to buy higher-yielding assets elsewhere, a strategy that profits while the yen stays weak Zero Hedge,Investing.com. Coordinated intervention makes that trade two-sided by introducing the risk of sudden yen strength, and commentators noted the precedent of August 2024, when an unwinding of yen-funded positions hit risk assets including crypto CoinDesk,Zero Hedge. Some analysts nonetheless argue the link between the yen and specific markets such as bitcoin is weak, pointing to broad dollar strength as the larger driver CoinDesk.
What remains unresolved?
Estimates of the operation's size differ, with Bank of Japan data pointing to as much as $36.58 billion while one analysis put the July 31 operation at about $52.8 billion Investing.com,Investing.com. It is also unclear how often intervention will recur: BOJ money-market data suggested Japan may not have intervened on Aug. 3 despite a sharp yen surge that traders had attributed to official action Investing.com. Forecasters including Citi and UBS expect the yen to remain under pressure once intervention stops unless policy shifts, with Citi seeing a possible return toward 160-162 per dollar Investing.com,CNBC.
Where Left and Right agree, and where they split
- Where Left and Right agree
- Extraordinary capacity was mobilized in days — over $100 billion, an unusual euro-for-yen structure, Fed repo access — and neither framing treats the purchases themselves as a lasting fix.
- Where Left and Right split
- Whose claims can summon that machinery overnight, or intervention standing in for the rate discipline only the Bank of Japan can supply.
How left and right read it
When bond yields are the worry, the machinery moves instantly: coordinated intervention, more than $100 billion in Japanese spending this year, an unusual Treasury structure of buying yen by selling euros, and Fed repo access arranged so nobody has to unload U.S. holdings. Note who this speed protects — holders of nearly $3 trillion in assets, guided by a Treasury secretary who once made $1 billion betting against this very currency. That capacity exists. Demand it for people, too.
“Treasury Secretary Scott Bessent made $1 billion betting against the yen as the top investor for George Soros more than a decade ago. Now, he is using the might of the U.S. economy to prop up the Japanese currency.” — The New York Times
Tokyo may have spent $36.58 billion in a single operation, pushing its intervention bill past $100 billion this year — while analysts say the yen's footing rests on Bank of Japan rate policy, not purchases. Buying a currency is not fixing one. Treasury selling euros to buy yen, with Japan drawing dollars through the Fed's repo facility, is an improvised to-do list; the discipline that lasts has to come from Tokyo's own policy rate.
“As to-do lists go, Scott Bessent's one was certainly unconventional.” — The Telegraph
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