The US Treasury intervened in foreign exchange markets on July 31 to support the Japanese yen, marking the first coordinated yen-buying operation with Japan in more than a decade, according to the Financial Times as reported by Reuters.
The Federal Reserve Bank of New York bought yen on behalf of the Treasury, executing the purchases by selling euros and buying the Japanese currency through Goldman Sachs and Morgan Stanley. Neither the Treasury nor the New York Fed disclosed the size of the operation.
The US move followed Japan’s own large-scale intervention on July 30, after the yen weakened to around 164 per dollar, its lowest level since 1986. Based on Bank of Japan money market data, analysts estimate Tokyo may have spent as much as 8.2 trillion yen, roughly $59 billion, although official figures will not be released until next month.
Treasury Secretary Scott Bessent has described the yen as significantly undervalued and said excessive currency volatility was undesirable, while emphasizing continued coordination with Japanese authorities on foreign exchange matters.
The intervention briefly strengthened the yen from around 163.65 to approximately 159.09 per dollar, although the currency later surrendered part of those gains as investors reassessed monetary policy expectations.
It is the first US operation to support the yen since the 2011 G7 intervention that followed Japan’s earthquake and tsunami. That earlier operation sought to weaken an excessively strong yen, whereas the latest effort aims to bolster a currency that has depreciated sharply for years.
The yen remains under structural pressure from the large interest-rate gap between Japan and the United States. The Bank of Japan left its policy rate unchanged at 1% on July 31 after raising rates in June, while signaling further tightening remains possible. Japanese rates still sit well below US levels, which encourages carry trades in which investors borrow cheaply in yen to buy higher-yielding assets abroad.
Analysts said US participation increases the credibility of Japan’s intervention by demonstrating international backing, rather than unilateral action by Tokyo alone. Currency markets will now watch whether the coordinated effort can slow the yen’s decline, though most economists argue sustained appreciation ultimately depends on monetary policy and economic fundamentals.
Sources: International Business Times, NHK World, Financial Times (as reported by Reuters)
Author: Finance Desk
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