US and Japan take action to prop up yen in rare joint move

Japan's Ministry of Finance and US Treasury Secretary Scott Bessent have confirmed that both nations jointly intervened last week to halt a steep slide in the yen after the currency weakened to a fresh 40-year low. This joint intervention marks the first of its kind since 2011, when both countries coordinated actions to weaken the yen following the devastating earthquake and tsunami in eastern Japan. Both officials emphasized that they will not hesitate to conduct further joint interventions in the future to protect global economic stability.

The historical weakness of the yen is primarily driven by Japan maintaining significantly lower central bank interest rates compared to other major economies like the US. The Bank of Japan raised its benchmark rate to 1% in June, marking the highest level since September 1995, whereas the US Federal Reserve's benchmark rate sits between 3.50% and 3.75%. This gap makes the Japanese currency less attractive to international investors. Additionally, Japan faces structural hurdles including a decades-long decline in its working-age population, low productivity, and a heavy reliance on energy imports priced in US dollars.

Stock photo for illustration only, not from the actual event

Shigeto Nagai, head of Japan economics at Oxford Economics, told the BBC that the United States agreed to participate because it serves its national interests by offering significant benefits at a low cost. He added that the two countries are expected to continue intervening intermittently in a coordinated manner for some time. Even if the actual intervention amount is not exceptionally large, maintaining prolonged vigilance will effectively deter speculators. Meanwhile, Scott Bessent stated in a social media post that the coordinated foreign exchange actions successfully countered disorderly yen movements.