US and Japan Join Forces to Support Yen as Currency Turmoil Tests Markets

A joint intervention lifts the yen from near 164

The United States and Japan carried out their first joint intervention to buy yen since 1998 last week, sending the Japanese currency to 155.23 against the dollar by Monday morning. The yen had fallen to a low near 164 last month, its weakest level in 40 years, raising the cost of imported food and energy and increasing pressure on Prime Minister Sanae Takaichi.

Japan acted in New York markets on Thursday, reportedly spending up to $58.97 billion. The US Treasury joined on Friday, with reports indicating that it sold euros, rather than dollars, to acquire yen. President Donald Trump described the operation as a signal of friendship, while Treasury Secretary Scott Bessent said Washington would not hesitate to participate in further joint action.

As of August 5, 2026, the operation had brought together several concerns: Japan's rising import costs, the risk of instability spreading to other Asian currencies, and the possibility that Tokyo might sell large amounts of US government debt to finance further intervention. The immediate currency response was strong, while the interest rate gap that had helped drive the yen lower remained.

Why the yen's decline hurt households

Japan's currency had been sliding for months. A weaker yen makes purchases priced in foreign currencies more expensive in yen, which helps explain why rising import costs for energy and food were putting pressure on households and Takaichi's approval ratings.

Tokyo had already spent tens of billions of dollars on interventions carried out alone earlier this year, with limited success. The Bank of Japan raised interest rates to 1 percent in June, but the currency showed little lasting improvement because Japanese and US interest rates remained far apart.

Interest rate gaps matter because investors compare the returns available in different currencies. Higher returns in the United States can keep demand focused on dollar investments even after Japan raises its own rate. Buying yen can push the currency higher quickly, while changing that underlying incentive requires a shift in monetary policy.

How the coordinated buying unfolded

Japan's Thursday operation was followed by US participation on Friday. The sequence gave the intervention a different weight from Tokyo's earlier efforts: both governments were now acting to support the same currency.

The reported US sale of euros was also a distinct part of the operation. Washington acquired yen by exchanging another reserve currency, rather than selling dollars. Japan's reported spending of up to $58.97 billion concerned its Thursday action; no amount was given for the US operation.

The main developments followed this sequence:

• Earlier this year, Japan spent tens of billions of dollars on interventions carried out alone, with limited success.
• In June, the Bank of Japan raised interest rates to 1 percent.
• Last month, the yen reached a low near 164 against the dollar.
• On Thursday last week, Japan intervened in New York markets.
• On Friday, the US Treasury joined the effort to buy yen.
• By Monday morning, the yen reached 155.23 against the dollar, its strongest level since early May.

Washington ties support to the alliance

Trump confirmed the move aboard Air Force One, describing it as a signal of friendship and saying that the United States is always there for Japan. His comments presented the intervention as a demonstration of support between the two allies as well as an economic measure.

Bessent posted on social media that Washington would not hesitate to take part in further joint action. The willingness to repeat the operation gave traders another consideration when deciding whether to bet on renewed yen weakness.

Analysts viewed coordinated intervention as more effective than action by Japan alone because US involvement increases the deterrent against speculative bets. The political message was close cooperation between the current US and Japanese administrations, backed by an operation in currency markets.

US Treasury holdings help explain the decision

Japan holds more than $1.1 trillion in US Treasuries, the debt securities issued by the American government. Those holdings connected Tokyo's currency problem to Washington's own bond market.

Japan could sell Treasury securities to obtain dollars for further yen purchases. Large sales could push bond prices lower and yields higher. A bond's yield is the return available to a buyer at its market price, so prices and yields move in opposite directions.

US participation aimed to limit forced selling that might destabilize American bond markets. The concern came as yields on US bonds maturing in 30 years already approached levels last seen in 2007. Washington therefore had a financial reason to help, alongside its diplomatic support for Japan.

A borrowing facility offers another route

Officials highlighted the Federal Reserve's FIMA repo facility as a way to obtain dollars without selling Treasury securities outright. The facility allows foreign central banks to borrow dollars against Treasury collateral.

Collateral is an asset pledged to support a loan. In this case, a central bank can use its Treasury holdings to secure temporary dollar funding instead of immediately putting those securities up for sale. Japan confirmed that it plans to use the facility for future needs.

The facility addresses the funding side of intervention. It gives Japan another way to access dollars and helps reduce the pressure that outright Treasury sales could place on the US bond market.

Currency gains bring mixed market effects

The dollar fell sharply to near 155.20 yen early Monday. The yen's move to 155.23 by Monday morning marked its strongest level since early May, and it held its gains through the session as traders stayed alert for additional intervention.

The euro climbed above $1.15 to its highest level in one and a half months, while sterling approached $1.35. The market response extended beyond the dollar and yen as investors adjusted to the coordinated action.

Japanese equities reversed earlier gains because the stronger yen weighed on exporters. Currency strength can ease pressure from imports while creating difficulties for companies earning revenue abroad: when foreign earnings are converted into yen, a stronger Japanese currency reduces their value in yen.

Japanese government bonds also reflected expectations of further policy changes. Yields on bonds maturing in two years briefly touched 1.545 percent, the highest since 1995, as markets priced in a possible Bank of Japan interest rate increase in September.

Asian currencies are part of the concern

Bessent warned that an excessively weak yen posed risks to Asian financial stability, recalling the crisis of the late 1990s. Analysts had also pointed to the possibility that pressure on Japan's currency could spread more widely across the region.

South Korea intervened to support the won and bought its currency on the same day as the broader coordinated action. Its response underscored shared concerns about currency volatility, while other Asian currencies also faced the risk of similar pressure.

A stable yen can support neighboring currencies and reduce the pressure on governments to sell their own dollar reserves. The US and Japanese operation therefore carried a regional purpose as well as addressing Japan's immediate currency weakness.

September becomes the next policy focus

Japanese Finance Minister Satsuki Katayama said officials remained attentive and in close communication with their US counterparts. Both governments signaled readiness to act again, keeping further intervention among the possible responses to renewed market pressure.

The Bank of Japan kept policy steady last week but offered its clearest signal yet that an interest rate increase in September remained possible. Bessent repeated calls for further Japanese rate increases, arguing that the yen remained substantially undervalued.

September was the next policy period identified for a possible increase; no exact date was given. Traders were watching both the central bank's rate decision and whether Washington and Tokyo would carry out more coordinated currency purchases.

Intervention buys time amid continuing pressures

Wide interest rate differences persisted after the operation. Some observers questioned whether coordinated buying could overcome the structural forces behind yen weakness, even with the stronger signal created by US participation.

Rising oil prices linked to tensions in the Middle East added to Japan's import costs. Proposed tax cuts and higher government spending could also put further pressure on the currency over time, leaving monetary and fiscal policy central to the outlook.

Experts viewed tighter Japanese monetary policy as the basis for lasting currency strength, rather than repeated intervention. The coordinated purchases could buy time for the Bank of Japan while markets adjusted, but the next stage depended on decisions about interest rates and the continuing pressures on Japan's economy.

Key Points

• The United States and Japan conducted their first joint intervention to buy yen since 1998.
• Japan reportedly spent up to $58.97 billion on Thursday; the US Treasury joined on Friday and reportedly sold euros to acquire yen.
• The yen reached 155.23 against the dollar by Monday morning after falling near 164 last month.
• Japan's holdings of more than $1.1 trillion in US Treasuries made potential bond sales a concern for Washington.
• Japan plans to use the Federal Reserve's FIMA repo facility for future funding needs.
• Both governments signaled readiness for further action, while markets watched for a possible Bank of Japan rate increase in September.