{"id":74998,"date":"2026-08-03T08:48:54","date_gmt":"2026-08-03T12:48:54","guid":{"rendered":"https:\/\/stateofthenation.info\/?p=74998"},"modified":"2026-08-03T08:51:29","modified_gmt":"2026-08-03T12:51:29","slug":"why-the-u-s-stepped-in-after-decades-to-prop-up-japans-yen","status":"publish","type":"post","link":"https:\/\/stateofthenation.info\/?p=74998","title":{"rendered":"<h2><b>Why the U.S. stepped in after decades to prop up Japan\u2019s yen<\/b><\/h2>"},"content":{"rendered":"<p><!--more--><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-74999\" src=\"http:\/\/stateofthenation.info\/wp-content\/uploads\/2026\/08\/Screenshot-2026-08-03-at-8.47.07-AM.png\" alt=\"\" width=\"573\" height=\"447\" srcset=\"https:\/\/stateofthenation.info\/wp-content\/uploads\/2026\/08\/Screenshot-2026-08-03-at-8.47.07-AM.png 573w, https:\/\/stateofthenation.info\/wp-content\/uploads\/2026\/08\/Screenshot-2026-08-03-at-8.47.07-AM-300x234.png 300w\" sizes=\"auto, (max-width: 573px) 100vw, 573px\" \/><\/p>\n<h3 class=\"RenderKeyPoints-header\"><strong>Key Points<\/strong><\/h3>\n<div><\/div>\n<div class=\"RenderKeyPoints-list\">\n<div>\n<div class=\"group\">\n<ul>\n<li>Analysts pointed to concerns about U.S. Treasury markets and the stability of Japan\u2019s financial system.<\/li>\n<li>The yen slid to 163.73 per dollar last Thursday before rebounding to 157.57 on Friday.<\/li>\n<\/ul>\n<\/div>\n<\/div>\n<\/div>\n<div id=\"ArticleBody-InlineImage-108175508\" class=\"InlineImage-imageEmbed\" data-test=\"InlineImage\">\n<div class=\"InlineImage-wrapper\">\n<div class=\"InlineImage-imagePlaceholder\">\n<div class=\"InlineImage-imageContainer\" tabindex=\"-1\" data-test=\"InlineImage-pictureContainer\"><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-75001\" src=\"http:\/\/stateofthenation.info\/wp-content\/uploads\/2026\/08\/108175508-1753238112301-gettyimages-1489146803-dollaryenyuangenericcoin-1024x576.jpg\" alt=\"\" width=\"640\" height=\"360\" srcset=\"https:\/\/stateofthenation.info\/wp-content\/uploads\/2026\/08\/108175508-1753238112301-gettyimages-1489146803-dollaryenyuangenericcoin-1024x576.jpg 1024w, https:\/\/stateofthenation.info\/wp-content\/uploads\/2026\/08\/108175508-1753238112301-gettyimages-1489146803-dollaryenyuangenericcoin-300x169.jpg 300w, https:\/\/stateofthenation.info\/wp-content\/uploads\/2026\/08\/108175508-1753238112301-gettyimages-1489146803-dollaryenyuangenericcoin-768x432.jpg 768w, https:\/\/stateofthenation.info\/wp-content\/uploads\/2026\/08\/108175508-1753238112301-gettyimages-1489146803-dollaryenyuangenericcoin-1536x864.jpg 1536w, https:\/\/stateofthenation.info\/wp-content\/uploads\/2026\/08\/108175508-1753238112301-gettyimages-1489146803-dollaryenyuangenericcoin.jpg 1858w\" sizes=\"auto, (max-width: 640px) 100vw, 640px\" \/><\/div>\n<\/div>\n<div>\n<h5 class=\"InlineImage-imageEmbedCaption\">The coordinated intervention was the first U.S.-Japan joint operation to buy yen since 1998.<br \/>\nManuel Augusto Moreno | Moment | Getty Images<\/h5>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"group\">\n<p>Washington\u2019s decision to join Japan in supporting the battered yen has prompted questions over what motivated the rare coordinated intervention, with analysts pointing to concerns over U.S. Treasury markets and Japan\u2019s financial system.<\/p>\n<p>Tokyo has grown increasingly wary of the yen\u2019s decline, which recently dropped to its\u00a0<a href=\"https:\/\/www.cnbc.com\/2026\/07\/01\/japan-yen-40-year-low-intervention-fed-boj-carry-trade.html\">weakest level against the dollar in nearly four decades<\/a>. The\u00a0<span id=\"RegularArticle-QuoteInBody-2\" class=\"QuoteInBody-quoteNameContainer\" data-test=\"QuoteInBody\"><a href=\"https:\/\/www.cnbc.com\/quotes\/JPY=\/\">yen<\/a><span id=\"-WatchlistDropdown\" class=\"AddToWatchlistButton-watchlistContainer\" data-analytics-id=\"-WatchlistDropdown\"><button class=\"AddToWatchlistButton-watchlistButton\" aria-label=\"Add To Watchlist\" data-testid=\"dropdown-btn\"><\/button><\/span><\/span> had been hovering at multi-decade lows, sliding to 163.73 per dollar last Thursday before rebounding to 157.57 Friday.<\/p>\n<p>The coordinated intervention was the first\u00a0<a href=\"https:\/\/www.mufgresearch.com\/fx\/asia-fx-talk-1st-joint-jpy-buying-fx-intervention-since-1998-3-august-2026\/\" target=\"_blank\" rel=\"noopener\">U.S.-Japan joint operation to buy yen since 1998<\/a>, and the first\u00a0<a href=\"https:\/\/www.researchgate.net\/figure\/Timeline-of-G-7-and-Swiss-Intervention-Practices_fig5_227438520\" target=\"_blank\" rel=\"noopener\">coordinated intervention involving the two countries since the G7<\/a> acted to weaken the yen after the 2011 earthquake.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-75002\" src=\"http:\/\/stateofthenation.info\/wp-content\/uploads\/2026\/08\/Screenshot-2026-08-03-at-8.50.11-AM.png\" alt=\"\" width=\"583\" height=\"568\" srcset=\"https:\/\/stateofthenation.info\/wp-content\/uploads\/2026\/08\/Screenshot-2026-08-03-at-8.50.11-AM.png 583w, https:\/\/stateofthenation.info\/wp-content\/uploads\/2026\/08\/Screenshot-2026-08-03-at-8.50.11-AM-300x292.png 300w\" sizes=\"auto, (max-width: 583px) 100vw, 583px\" \/><\/p>\n<\/div>\n<div class=\"group\">\n<p>Industry veterans told CNBC that one of Washington\u2019s biggest concerns was avoiding a scenario where Japan would need to dump large quantities of Treasuries to finance unilateral intervention, given how the North Asian nation is the largest foreign holder of U.S. government debt.<\/p>\n<p>Louise Loo, head of Asia economics at Oxford Economics, said that that was \u201cpossibly one of the key reasons\u201d behind U.S. participation.<\/p>\n<p>\u201cThere is a self-preservation element here. Volatile markets driven by potentially fiscally-aggressive policies from Japan could extend to the U.S. Treasury markets, destabilizing the dollar.\u201d<\/p>\n<p>Tokyo\u2019s and Washington\u2019s emphasis on the Federal Reserve\u2019s standing FIMA repo facility \u2014 which allows foreign central banks to obtain dollar liquidity without selling Treasuries outright \u2014 \u201cwas a clue that they\u2019d like to avoid forced-selling as much as possible,\u201d she said.<\/p>\n<p>Japan\u2019s finance ministry said Monday it plans to use the FIMA repo facility for future interventions. Masahiko Loo, senior macro strategist at State Street, said the signal \u201cmay be bigger than the intervention itself.\u201d<\/p>\n<p>Washington\u2019s concerns likely extend beyond the yen, he added. A persistently weak yen could trigger further selling in Japanese government bonds, with higher yields spilling over into global bond markets at a time when both Japan and the U.S. are grappling with rising long-term borrowing costs.<\/p>\n<p>\u201cHighlighting access to the Fed\u2019s FIMA repo tells markets Japan can raise dollar liquidity without selling Treasuries &#8230; addressing concerns that MOF intervention could pressure U.S. funding markets through short-end UST sales,\u201d he said. \u201cIt\u2019s an attempt to maximize the signaling effect and get the biggest bang for the buck with the tools already available.\u201d<\/p>\n<p>Yields of the U.S. 10-year Treasury have gained almost 57 points since the start of the year.<\/p>\n<\/div>\n<h2 class=\"ArticleBody-subtitle\">A \u2018new phase\u2019 of U.S.-Japan relationship<\/h2>\n<div class=\"group\">\n<p><a href=\"https:\/\/x.com\/RapidResponse47\/status\/2084042860567937404\" target=\"_blank\" rel=\"noopener\">President Donald Trump said<\/a>\u00a0that the U.S. had participated in last week\u2019s coordinated intervention to support the yen as a gesture of support for Japan and in the interest of global economic stability.<\/p>\n<p>Beyond protecting U.S. bond markets, the intervention also reflected Washington\u2019s broader economic and geopolitical priorities.<\/p>\n<p>Oxford Economics\u2019 Loo noted the U.S. has repeatedly argued the yen is \u201csubstantially undervalued,\u201d providing it an incentive in correcting what it sees as an unfair trade advantage as it makes Japanese exports more competitive.<\/p>\n<p>She added that if Washington believes Japan\u2019s fiscal policies are feeding into higher JGB yields and a weaker currency, coordinated intervention could buy time for the BOJ until it is in a position to resume raising interest rates later this year. A stronger yen ultimately requires tighter Japanese monetary policy rather than repeated intervention, the economist noted.<\/p>\n<\/div>\n<div class=\"group\">\n<p>Jesper Koll, expert director at Monex said the operation reflected a broader shift in the U.S.-Japan relationship under U.S. President Donald Trump and Japanese Prime Minister Sanae Takaichi.<\/p>\n<p>\u201cU.S.-Japan cooperation and partnership has entered a new phase,\u201d he said, adding that coordinated intervention showed \u201cwhen Japan asks for help America will answer Japan\u2019s call.\u201d He also argued the move sends a geopolitical message to Beijing as \u201cChina\u2019s leadership cares about actions, not words.\u201d<\/p>\n<p>Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Securities, said coordinated intervention is inherently more powerful because of U.S. participation.<\/p>\n<p>\u201cThe disproportionately heightened efficacy of FX intervention\u201d comes from the involvement of the U.S. Treasury and Federal Reserve, giving markets greater reason to believe authorities are prepared to act again if necessary, he said. Together with both governments warning they \u201cwill not hesitate\u201d to intervene again, it \u201cups the ante on deterrence\u201d against speculative bets pressuring the yen.<\/p>\n<p>He also argued that U.S. participation eases concerns that Japan\u2019s intervention could push Treasury yields higher by forcing sales of U.S. government debt, while helping stabilize Japanese bond markets.<\/p>\n<p>Still, analysts warned that the coordinated action may prove no more durable than previous interventions unless Japan addresses the structural forces driving yen weakness.<\/p>\n<\/div>\n<h2 class=\"ArticleBody-subtitle\"><a id=\"headline1\"><\/a>A \u2018counterproductive\u2019 move?<\/h2>\n<div class=\"group\">\n<p><a href=\"https:\/\/www.cnbc.com\/2026\/08\/01\/us-treasury-intervenes-to-support-yen-after-japan-steps-in-ft.html\">Reports that the U.S. sold euros<\/a>\u00a0rather than dollars to buy yen surprised markets because coordinated intervention has traditionally been funded with dollar assets.<\/p>\n<p>Robin Brooks, senior fellow at the Brookings Institution, questioned the mechanics of the U.S. operation, highlighting that it is \u201cconfusing markets and will prove counterproductive.\u201d<\/p>\n<p>\u201cOn the surface, that may give the impression that this intervention will be more impactful than past efforts, but U.S. participation raises more questions than answers, especially the very odd news that the US sold Euros to buy Yen.\u201d<\/p>\n<p>\u201cThis kind of twist in my opinion undercuts the efficacy of U.S. participation, because it invariably will have markets wondering why the U.S. didn\u2019t just fund Yen buying out of Dollars.\u201d<\/p>\n<p>Brooks argued intervention ultimately cannot reverse depreciation driven by Japan\u2019s bond market.<\/p>\n<p>\u201cAs long as Japan\u2019s government bond yields are artificially capped,\u201d he said, \u201cthe yen is overvalued and needs to fall.\u201d The BOJ\u00a0<a href=\"https:\/\/www.boj.or.jp\/en\/research\/wps_rev\/wps_2024\/data\/wp24e10.pdf\" target=\"_blank\" rel=\"noopener\">ended formal yield curve control in March 2024<\/a>, but it has continued to buy large amounts of Japanese government bonds. Brooks argued those purchases continue to keep borrowing costs below where they would otherwise settle in a free market.<\/p>\n<p>State Street\u2019s Loo likewise highlighted that intervention can buy time, but not change the long-term trajectory. \u201cIntervention may shape the next few months. BOJ normalization and hedging flows will shape the next few years.\u201d<\/p>\n<\/div>\n<p>____<br \/>\n<a href=\"https:\/\/www.cnbc.com\/2026\/08\/03\/japan-yen-intervention-us-treasurys-euros-.html\">https:\/\/www.cnbc.com\/2026\/08\/03\/japan-yen-intervention-us-treasurys-euros-.html<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-74998","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/stateofthenation.info\/index.php?rest_route=\/wp\/v2\/posts\/74998","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/stateofthenation.info\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/stateofthenation.info\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/stateofthenation.info\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/stateofthenation.info\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=74998"}],"version-history":[{"count":2,"href":"https:\/\/stateofthenation.info\/index.php?rest_route=\/wp\/v2\/posts\/74998\/revisions"}],"predecessor-version":[{"id":75003,"href":"https:\/\/stateofthenation.info\/index.php?rest_route=\/wp\/v2\/posts\/74998\/revisions\/75003"}],"wp:attachment":[{"href":"https:\/\/stateofthenation.info\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=74998"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/stateofthenation.info\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=74998"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/stateofthenation.info\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=74998"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}