Editor's Choice: Intervention buys time, but won't fix yen's fundamental problem

Japanese Finance Minister Satsuki Katayama and U.S. Treasury Secretary Scott Bessent coordinated a coordinated yen-buying intervention in late July, for the first time in 28 years as the yen reached historic lows, nearing 164 to the dollar. The last coordinated intervention occurred during the Asian financial crisis and after the 2011 Tohoku earthquake.

The intervention was aimed at preventing excessive depreciation of the yen and potential disruption in global financial markets. However, it will only buy time and doesn't fix the fundamental problem of a weak yen. U.S. Treasury Secretary Scott Bessent stated that one objective was to contain Asia currency risk as many Asian currencies follow the Japanese yen.

Japan must demonstrate greater fiscal discipline, but its government has shown no sign of abandoning its expansionary fiscal stance, raising concerns about Japan's fiscal health. The Bank of Japan needs to dispel perceptions of falling behind on interest rate hikes, with the next policy meeting in September likely to be the main focus for markets.

The yen has once again weakened to 158 to the dollar, with Toyota Motor revising its assumed exchange rate for the fiscal year ending March 2027 from 150 to 160 yen per dollar.