The yen lost half its value following a joint intervention by Japan and the U.S.
The Japanese yen has lost about half of the gains it made following the joint currency intervention by Tokyo and Washington in late July. Following the intervention, the exchange rate strengthened from 163 to 157 yen per dollar, but by August 11, it had weakened to 159 yen per dollar, according to Fortune.
On July 30, the Japanese Ministry of Finance, according to the publication, may have sold up to $59 billion to buy yen, which was then trading near 40-year lows. Subsequently, Japan and the U.S. confirmed their joint efforts to support the Japanese currency. This was the first such intervention by the two countries since 1998. Japanese Finance Minister Satsuki Katayama and U.S. Treasury Secretary Scott Bessent stated their readiness to repeat the intervention if necessary.
Data from the Bank of Japan indicate that the Japanese side may have sold assets worth up to $58.97 billion. The volume of U.S. transactions was not officially disclosed. However, a photograph of Bessent’s notes taken during a government meeting indicated: “Buy Japanese yen (JPY) for $5–10 billion.”
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According to economists whose assessments are cited by Fortune, the intervention does not address the fundamental causes of the yen’s weakness. These include the significant difference between interest rates in the U.S. and Japan, concerns about the Japanese government’s fiscal policy, and higher returns on assets in other countries. The interest rate in the U.S. is 3.5–3.75%, while in Japan it is 1.0%.
This difference fuels the so-called carry trade: investors borrow funds in yen at low rates and invest them in dollar-denominated assets with higher yields. Julius Baer economist David Mayer also cited excessively accommodative monetary policy and concerns about potential political influence on it amid fiscal expansion as contributing factors.
Goldman Sachs analysts Dominic Wilson and Kamakshya Trivedi noted that joint action by the U.S. and Japan could “buy a little time,” but are unlikely to alter the yen’s trajectory without an adjustment to Japanese economic policy or a significant deterioration in the global economic outlook.
