The United States and Japan reportedly carried out a coordinated currency market intervention to support the Japanese yen after it fell to its weakest level in nearly four decades, according to the Financial Times.
The report said the joint action marked the first coordinated effort by Washington and Tokyo to strengthen the yen since 1998.
The Japanese currency came under heavy pressure last month, dropping to 163.24 against the US dollar, its lowest level since 1986. Analysts attributed the decline to higher US interest rates, rising oil prices and continued capital outflows from Japan.
Citing people familiar with the matter, the Financial Times reported that the Federal Reserve Bank of New York sold euros to purchase yen on behalf of the US Treasury. The transactions were reportedly executed through Goldman Sachs and Morgan Stanley.
The reported intervention followed a sharp rebound in the yen, which strengthened to 160.53 per dollar by Friday after briefly reaching 158 a day earlier. The rapid recovery fuelled speculation that Japanese authorities had also entered the market to support the currency.
Stephen Innes of SPI Asset Management said the price movements resembled previous intervention episodes, although it remained unclear whether Tokyo had directly participated.
Estimates of the intervention’s scale vary. Analysts quoted by the Financial Times suggested Japan may have spent around 8.45 trillion yen, equivalent to about $52.8 billion, while the Nikkei newspaper estimated the figure at between 6 trillion and 7 trillion yen.
The yen has remained under pressure due to the widening interest rate gap between Japan and the United States, where borrowing costs remain significantly higher. Expectations that the US Federal Reserve could raise interest rates again later this year have further increased the divergence.
The higher returns available abroad have encouraged investors to borrow at Japan’s low interest rates and invest in overseas assets, a strategy known as the carry trade. The resulting capital outflows have continued to weigh on the Japanese currency.
