The United States and Japan have stepped up cooperation to stabilise the Japanese yen following months of preparations, marking a rare public alignment between Washington and Tokyo on currency policy as both governments seek to counter the effects of a prolonged depreciation of the Japanese currency.
According to Reuters, U.S. Treasury Secretary Scott Bessent publicly backed efforts to strengthen the yen, providing Japan with additional support after previous unilateral interventions failed to halt heavy speculative selling. Japanese officials said discussions on exchange rate coordination have intensified throughout the year, with multiple high level meetings held between finance officials from both countries.
Japanese Finance Minister Satsuki Katayama said she has held around 10 discussions with Bessent, including a lengthy meeting during his visit to Japan in May. She said both countries remain committed to close coordination on foreign exchange issues.
The weaker yen has increased import costs and added pressure on Japanese households, while also reducing the impact of U.S. tariffs by making Japanese exports more competitive. Washington is also concerned that instability in Japan’s bond market could spill over into U.S. Treasury markets.
Japan’s latest intervention campaign, conducted in coordination with the Bank of Japan (BOJ), strengthened the yen from around 162.80 to 157.80 against the U.S. dollar after officials entered the market late on July 30. Market participants believe the United States also supported the intervention after reports emerged that the U.S. Treasury had alerted major banks to prepare for possible action.
A Reuters photograph taken during a U.S. cabinet meeting also showed Bessent carrying notes referencing plans to buy between $5 billion and $10 billion worth of Japanese yen.
The BOJ has also signalled a more hawkish monetary policy stance after raising interest rates to 1%, the highest level in more than three decades. Governor Kazuo Ueda recently warned of increasing inflation risks, reinforcing market expectations that another interest rate increase could come as early as September.
Bessent welcomed the BOJ’s policy direction, saying the United States strongly supports Japan’s efforts to correct the yen’s undervaluation through tighter monetary policy. Japanese officials have also indicated they will continue aligning government currency measures with the central bank’s interest rate strategy.
Analysts said coordinated intervention alone is unlikely to provide lasting support for the yen, making another BOJ interest rate increase increasingly likely. Financial markets are now widely expecting policymakers to consider another rate hike when the central bank meets in September.
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