Japan to announce Tokyo, Washington took joint action on yen, sources say

Japanese Finance Minister Satsuki Katayama will announce on August 3 that Tokyo and Washington jointly intervened in the currency market to halt the yen's plunge to 40-year lows, according to two Japanese government sources. Katayama is expected to emphasize the two nations' commitment to tackling what they view as excessive yen devaluation, sources familiar with the situation told Reuters, speaking on condition of anonymity due to the matter's sensitivity.

One source confirmed Katayama would indeed announce "joint action," adding the operation remains in progress. The Ministry of Finance (MOF) could not comment as of August 2, and US Treasury officials did not immediately respond to inquiries. The anticipated joint announcement follows purported rounds of yen purchases by Japanese and US authorities, the first such coordinated intervention since 2011, aiming to strengthen the Japanese currency from its lowest levels against the dollar since 1986.

Japanese authorities reportedly bought yen for dollars during New York trading on July 30, with Bank of Japan (BOJ) data suggesting they sold up to US$58.97 billion to support the yen. Tokyo's initial intervention preceded the BOJ's decision on July 31 to maintain monetary policy while indicating a high likelihood of an interest rate hike soon.

Following BOJ Governor Kazuo Ueda's press conference on the central bank's decision, the yen surged, suggesting another potential intervention by Tokyo. Katayama's top currency diplomat, Atsushi Mimura, stated that the MOF and BOJ would respond closely in coordination to combat the weak yen. On July 31, the US Treasury notified several banks it may intervene in the yen market, urging them to "stand ready for future action," according to a source familiar with the matter.

US Treasury Secretary Scott Bessent, who described the yen as "very undervalued," had a note titled "To do" and "Buy Japanese yen (JPY) US$5-10 billion" at a Cabinet meeting on July 31. The MOF posted a rare English message on social media platform X, stating it had "a broad range of tools to address market liquidity needs," including access to the Fed's repurchase facility, which allows Japan to raise dollar liquidity without selling US Treasuries.

However, critics argue Japan may face challenges in sustained yen-buying interventions, as selling down its large Treasury holdings to fund such action could lead to a sell-off in US debt and a rise in US yields. Some analysts view the signs of Japan-US cooperation as driven by Washington's concern about rising Treasury yields, which could worsen if Tokyo fails to prevent a sell-off in the yen and Japanese government bonds (JGB).

Economy Minister Minoru Kiuchi stated on August 2 that the government would intensify efforts to enhance communication with markets to maintain trust in Japan's fiscal sustainability.