US Treasury and Japan Coordinate Intervention to Support Yen

The US Treasury intervened in exchange rates on Friday to strengthen the Japanese yen, marking the first time in nearly 30 years that Washington and Tokyo have joined forces to support the currency through direct purchases. The Federal Reserve Bank of New York sold euros to buy yen on behalf of the Treasury, utilizing Goldman Sachs and Morgan Stanley to conduct the sales. This move follows a period of significant volatility where the yen reached its weakest level against the dollar since 1986 on July 23 and recently hit 40 year lows near 164 yen per dollar.

Analysts estimate that Japanese authorities also intervened on Thursday, potentially spending approximately 8.45 trillion yen. Following these actions, the dollar weakened by about 4 percent on Thursday and another 1.9 percent on Friday, closing at 157.57 yen. The intervention occurred as the Bank of Japan maintained interest rates at 1 percent. Governor Kazuo Ueda stated that the bank would monitor inflation risks and could accelerate rate hikes to avoid falling behind the curve.

Treasury Secretary Scott Bessent indicated on X that the two countries maintain a strong relationship and close coordination. Historically, the US Treasury last bought the yen to strengthen the Japanese economy in 1998, though it previously intervened in 2011 to weaken the currency during a coordinated international effort following the Tohoku earthquake and tsunami.