The U.S. Treasury has stepped directly into currency markets to buy Japanese yen, marking the first coordinated intervention with Tokyo in over a decade as officials move to halt the yen’s slide to 40-year lows, according to multiple reports.
The Financial Times, citing three people familiar with the matter, reported that the Federal Reserve Bank of New York sold euros and purchased yen on behalf of the Treasury on Friday. The trades were executed through Goldman Sachs and Morgan Stanley, the report said. The FT did not disclose the size of the purchases.
Evidence of Washington’s involvement also surfaced in a Reuters photograph taken during a cabinet meeting at Camp David in Maryland. The image, captured over Treasury Secretary Scott Bessent’s shoulder during an on-the-record portion of the meeting, shows a notepad with the underscored words “To Do” followed by “Buy Japanese Yen (JPY) $5-10 bil.”
Earlier on Friday, the Treasury informed several banks that it could intervene in the yen market and instructed them to “stand ready for future action,” according to a person familiar with the matter who spoke to Reuters.
A senior Japanese government official told Reuters that Finance Minister Satsuki Katayama is expected to announce on Monday that Tokyo and Washington jointly intervened in currency markets. The official confirmed the announcement would refer to “joint action” and said the operation remained ongoing.
The move represents a significant escalation in efforts to support the yen, which hit its weakest level against the dollar since 1986 last week, trading above 163 yen per dollar. The currency has since rebounded sharply, falling to 160.18 yen on Thursday and dropping further to 157.42 yen on Friday.
Coordinated Action
This marks the first time the U.S. Treasury has directly supported the yen since 2011, when it coordinated with fellow G7 nations to stabilize markets following Japan’s earthquake and tsunami disaster. The 1998 intervention, when Washington bought yen to contain the Asian financial crisis, was the last time the two countries acted jointly to strengthen the currency.
The U.S. intervention follows apparent unilateral action by Japanese authorities. Bank of Japan data released Friday indicated that Japan may have sold as much as $58.97 billion to buy yen on Thursday, signaling repeated efforts to stem the currency’s weakness.
Japanese authorities also conducted yen-buying operations during New York trading hours on Thursday, according to a market source. The action came shortly before the Bank of Japan left monetary policy unchanged on Friday but signaled a strong possibility of raising interest rates soon. A rate increase would narrow the yield gap between Japanese and U.S. assets, potentially making the yen more attractive to investors.
Reported Intervention DetailsU.S. Treasury notepad reference$5 billion – $10 billion yen purchaseJapan’s estimated Thursday intervention$58.97 billionPrevious U.S. yen support2011 (G7 coordinated)Previous joint U.S.-Japan yen buying1998
Note: Amounts based on reports from Reuters, the Financial Times, and Bank of Japan data.
Bessent had said last week that the Japanese currency appeared significantly undervalued. The Treasury did not immediately respond to requests for comment on the FT report and the notepad photo. The New York Fed and Morgan Stanley also did not respond to requests for comment outside regular business hours, while Goldman Sachs declined to comment.
Market Impact
News of the potential intervention helped push the yen higher against the dollar on Friday. Data from LSEG showed the dollar dropped from about 158.9 yen at around 4:14 p.m. EDT to about 157.6 yen just before 5 p.m. EDT, a decline of roughly 0.8%.
The intervention carries implications beyond the currency market. Market analysts note that a weaker yen has forced Japanese authorities to sell dollar assets to fund their repeated interventions. Since a substantial portion of Japan’s foreign exchange reserves are held in U.S. Treasuries, Tokyo’s ongoing market operations could translate into selling of American government debt, potentially pushing long-term U.S. yields higher.
The U.S. 30-year Treasury yield has been hovering near 5.3%, adding pressure on equity valuations. By signaling that Washington will not tolerate excessive yen weakness, the Treasury may be attempting to reduce the perceived need for Japan to liquidate its U.S. bond holdings, thereby helping to stabilize long-term rates.
A stronger yen could weigh on Japanese exporters by reducing the domestic value of overseas earnings. However, it could also lower import costs and ease inflationary pressure from energy and raw materials, a key concern for Japanese policymakers.
Continued intervention may increase volatility in the dollar-yen pair and force investors holding large short-yen positions to unwind their trades, potentially amplifying currency swings in the coming sessions.
Japan’s Ministry of Finance and the U.S. Treasury did not immediately respond to requests for comment.
AloJapan.com