Japan and the United States are preparing a joint policy to stop speculators from driving the yen to fresh multi-decade lows, with an announcement possible as early as next week. The move follows Japan's largest one-day gain against the dollar since 2022, after it sold up to $58.97 billion to buy yen on July 30, and reports that the U.S. Treasury has told banks to prepare for action of its own in the currency market.
Japan's Ministry of Finance sold as much as $58.97 billion to buy yen on July 30, the currency's largest one-day gain against the dollar since 2022, pushing it from near 164 per dollar toward the upper 150s. Informed sources tell Kyodo News and CNBC that Japan and the United States may unveil a formal joint policy within days.
Treasury Steps in Behind Tokyo
A day after Japan's move, the U.S. Treasury told major banks to prepare for possible intervention of its own, according to a person familiar with the matter. The Financial Times later reported that the New York Federal Reserve had sold euros to buy yen through banks including Goldman Sachs and Morgan Stanley. It would be Washington's first direct move to support the yen in more than a decade, since coordinated Group of Seven action after Japan's 2011 earthquake and tsunami.
Reuters also photographed Treasury Secretary Scott Bessent's notepad at a Camp David meeting, showing a handwritten plan to buy $5-10 billion in yen. Japan's top currency official, Atsushi Mimura, said U.S. support went beyond symbolic backing.
Years of Rate Gaps Behind the Slide
The yen has weakened steadily since 2022 as the Bank of Japan kept interest rates far below the Federal Reserve's, fueling the so-called yen carry trade, in which investors borrow yen cheaply to invest in higher-yielding dollar assets. That trade pushed the yen to levels last seen in the mid-1980s and raised Japanese households' costs for imported energy and food.
Japan already tried a record intervention of about 11.73 trillion yen, or roughly $73 billion, in April and May. The yen briefly strengthened before drifting back toward its prior lows, a pattern typical of Japanese interventions when not paired with a lasting shift in interest rate policy.
Treasury Secretary Scott Bessent has called the yen "very undervalued" and said excessive volatility was unhealthy for markets. Bessent's comments, paired with the reported Treasury purchases, point to a rare degree of coordination between the world's largest and fourth-largest economies on currency policy.
What Comes Next
Whether the policy holds depends on fundamentals, analysts say: if the Bank of Japan raises rates further, or the Federal Reserve cuts them, the interest rate gap driving yen weakness would narrow and reinforce any official action. Without that shift, verbal commitments and one-time interventions have historically faded within weeks or months. The announcement is also expected to land shortly before Group of 20 finance ministers meet, giving both governments a chance to signal unity on a broader stage.
Source: Bitcoin News
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