Yen Jumps as US and Japan Confirm Joint FX Intervention; Dollar Flat

The yen rallied sharply after Japanese and US authorities confirmed a coordinated intervention to support the Japanese currency, sending the dollar flat against a basket of major currencies. The operation, which involved the US Treasury selling euros to buy yen, marked the first joint yen-buying effort between Washington and Tokyo since 1998 and the first coordinated intervention by the two countries since the G7 acted to weaken the yen after the 2011 earthquake.

Japan’s Ministry of Finance said the move “countered excessive volatility and disorderly movements in the Japanese yen in recent months,” adding that it “will not hesitate to conduct further joint intervention.” The statement was made in close communication with the US Treasury, it noted.

The intervention came after the yen slid to near 163 per dollar last month, its weakest level since 1986, pressured by higher US interest rates, rising oil prices and persistent capital outflows. The currency rebounded sharply after the joint action.

Central bank data indicated Japan may have spent as much as $58.97 billion on July 30 and $36.58 billion on the following day in what could be the largest-ever yen-buying operation, according to Reuters. Japan’s Ministry of Finance will release official records on August 28.

The US Treasury’s use of euros to fund the yen purchases drew attention from European officials. The European Central Bank was made aware of the trade after it was executed, the Financial Times reported. Some senior ECB officials viewed the US decision as an unprecedented breach of longstanding conventions on cooperation between Western monetary authorities, according to the FT. A US Treasury spokesman confirmed the reallocation of reserve assets.

President Donald Trump addressed the operation directly. “We’re very strong — very, very strong financially. They are, you know, they have a weakening yen, and they wanted a little bit of help. And we’re always there for Japan,” Trump said, according to reports from Al Bawaba and a social media clip. He added, “Japan’s been very good to us, with the exception, of course, of Pearl Harbor.”

The coordinated action has reshaped market expectations for the yen. “Japan’s Ministry of Finance and the US Treasury have successfully weaponized the yen,” said Jesper Koll, expert director for Monex Group, as reported by CNBC. “When increasingly scarce national assets are spent in unison on the same target by two major sovereigns, markets will have to listen.”

Cornell University professor Eswar Prasad described the move as defensive but noted that “currency market intervention has clearly taken on a geopolitical tinge,” with the Trump administration appearing more willing to support central banks of countries it views as aligned with US priorities. Analysts drew parallels with Washington’s support for Argentina’s peso in 2025, when the Treasury used its Exchange Stabilization Fund to provide a $20 billion currency swap with Argentina’s central bank.

For investors, the intervention introduces a new layer of risk to currency markets. “It changes the calculus for funding trades specifically,” said Billy Leung, investment strategist at Global X ETFs. “If investors now see intervention risk as a live and coordinated threat, they will likely become more cautious running large short-yen positions and rotate toward alternative funding currencies.” The yen has long been the preferred funding currency for carry trades.

Masahiko Loo, senior fixed income strategist at State Street Investment, said the biggest shift is that “traders now have a new variable to price: policy reaction functions, not just macro fundamentals.”

Japan’s earlier intervention in April also set records. Quarterly data from Japan’s Ministry of Finance released on Friday showed authorities intervened on three days from April 30 through May 6 during Golden Week holidays. The largest single-day operation amounted to 6.28 trillion yen ($39.64 billion) on April 30, surpassing the previous record of 5.92 trillion yen set on April 29, 2024. That intervention lifted the yen from a near two-year low of 160.725 per dollar to around 155 by May 6, but did not reverse the currency’s broader downtrend.

To ease concerns about Japan’s capacity for large-scale intervention, Tokyo and Washington have said Japan could tap a Covid-19 era Federal Reserve backstop for major central banks. However, Federal Reserve data showed no repurchase agreements were executed under foreign official accounts in the week through August 5, indicating Japan did not use the facility in its latest operation.