US Intervenes to Support Yen for First Time Since 1998 in Coordinated Action

The United States intervened directly in currency markets to support the Japanese yen for the first time since 1998, a coordinated effort that Treasury Secretary Scott Bessent said was aimed at preventing “disorderly movements” and potential contagion.

The yen had slid to its weakest level since 1986, trading as low as 163.65 per dollar on Thursday, July 30, before rebounding sharply after Japanese authorities stepped in. On Friday, July 31, the U.S. Treasury informed a number of banks through the Federal Reserve Bank of New York that it might intervene and that they should “stand ready for future action,” according to a source familiar with the matter. The yen last traded at 159.09 per dollar on Friday after the notice.

On Sunday, August 2, Bessent confirmed the intervention in a statement on X, saying, “Friday’s coordinated foreign exchange actions countered disorderly yen movements.” He added that the Treasury “remains attentive and in close communication with our counterparts at MOF and BOJ” and “will not hesitate to participate in further joint intervention.”

The U.S. operation used euros rather than dollars to buy yen, according to banking analysts and reports. The Federal Reserve sold euros on behalf of the Treasury, a move that avoided weakening the dollar directly. As a result, the euro fell against most major G10 currencies and lost approximately four percent against the yen within a few days.

Japan’s own intervention was estimated at about $52.8 billion by the Financial Times, while the Nikkei put the figure between $38.2 billion and $44.6 billion. Japan’s finance ministry said the action “countered excessive volatility and disorderly movements in the Japanese yen in recent months” and added that it “will not hesitate to conduct further joint intervention.”

President Donald Trump publicly backed the move, saying in a recorded comment: “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. Japan’s been very good to us, with the exception, of course, of Pearl Harbor.”

Bessent, in a clip aired on the War Room program, laid out the rationale in terms of crisis prevention. “One of the things that triggered the Asian financial crisis was a very weak Japanese yen that caused a tsunami across Thailand, Indonesia, and Malaysia,” he said. “Someone asked me, ‘What’s the emergency?’ The emergency is stopping an emergency. We don’t have to wait for the crisis. We can remediate it early.”

The intervention is widely seen as aimed at protecting the U.S. Treasury market. Japan is the largest foreign holder of U.S. government debt, with approximately $1.14 trillion in Treasury securities. A collapsing yen raises the risk that Japan would sell Treasuries to defend its currency, pushing U.S. yields higher at a politically sensitive time. Bessent’s statement also highlighted the FIMA Repo Facility, an existing Federal Reserve mechanism that allows foreign central banks to borrow dollars against Treasury collateral. He said the Treasury “would encourage it to be upsized in the coming months,” effectively providing a backstop that lets Japan obtain dollar liquidity without selling its holdings into the open market.

Some analysts, however, have cautioned that the intervention is a temporary fix. The yen’s weakness is rooted in structural factors, including Japan’s large public-debt burden and the interest-rate differential between the U.S. and Japan. Without sustained follow-through from the Bank of Japan on rate normalization and Japanese fiscal discipline, official buying may only delay the inevitable, according to market commentary.

The long-term risks to the U.S. debt system also remain under scrutiny. Interest payments on the national debt have already risen above one trillion dollars annually, exceeding the U.S. defense budget, and the Congressional Budget Office projects the fiscal outlook will deteriorate further by 2031, according to one analysis. A coordinated reduction in Treasury holdings by major foreign investors could weaken demand for U.S. debt, though the dollar’s role in global trade and energy markets provides a buffer.

The coordinated intervention marks a significant shift in U.S. foreign-exchange policy, with the Treasury and Fed explicitly stepping into a G7 currency market for the first time in nearly three decades. The last such U.S. intervention in the yen occurred in 1998.