Japan to announce that Tokyo and Washington took joint action to support the yen, Reuters reports
Finance Minister Satsuki Katayama is likely to stress the two countries' determination to combat what they see as excessive yen declines, sources tell Reuters.
Japanese Finance Minister Satsuki Katayama plans to reveal on Monday that Tokyo and Washington collaborated in the currency market to stabilize the yen, two Japanese government sources told Reuters. The officials spoke on condition of anonymity due to the sensitive nature of the announcement. Katayama is expected to highlight the nations' resolve to address what they perceive as excessive yen depreciation.
One source confirmed Katayama's intention to disclose "joint action," adding that the operation remains active. The Ministry of Finance was unavailable for comment as of Sunday. U.S. Treasury Department officials have not yet provided a statement.
The anticipated announcement follows reports of yen-buying by Japanese and U.S. authorities, marking the first joint intervention since 2011. This intervention aims to lift the yen's value from its all-time lows against the dollar since 1986. The Japanese government engaged in buying yen with dollars in New York trading hours on Thursday, with Bank of Japan data indicating it potentially sold up to $58.97 billion for this support.
Tokyo's initial intervention occurred just before the Bank of Japan's decision on Friday to maintain monetary policy while signaling a high probability of an interest rate increase soon.
The widening interest rate gap between Japan and the U.S., due to the Federal Reserve's more aggressive policy stance, has contributed to the dollar's strength against the yen. Following the Bank of Japan Governor Kazuo Ueda's press conference on the central bank's decision, the yen experienced a sharp rise, likely from another round of yen-buying intervention by Tokyo.
Katayama's top currency diplomat, Atsushi Mimura, indicated during a press briefing that the Ministry of Finance and Bank of Japan are coordinating closely to counteract the weak yen. The U.S. Treasury had informed several banks of potential intervention in the yen market on Friday, urging them to remain prepared for future actions.
Treasury Secretary Scott Bessent, who views the yen as "very undervalued," had a notepad during a cabinet meeting with the directive "Buy Japanese Yen (JPY) $5-10 bil." This shows further bilateral coordination between the two nations.
Japan has access to the Federal Reserve's repurchase facility, providing temporary dollar liquidity since 2020, which could facilitate intervention without selling U.S. Treasuries. This facility might help Tokyo manage funding pressures for future actions. However, concerns have been raised about Japan's ability to continue intervention, as selling its substantial Treasury holdings could trigger a market reaction, potentially raising U.S. yields.
Some analysts see Japan-U.S. cooperation as driven by Washington's concern over rising Treasury yields, which could worsen if Japan fails to prevent a yen and government bond selloff. Both countries face the risk of inflation surging, potentially leaving their central banks behind the curve, according to former BOJ official Nobuyasu Atago.
Economy Minister Minoru Kiuchi emphasized the importance of maintaining market confidence in Japan's fiscal stability.
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