By Makiko Yamazaki and Leika Kihara
TOKYO, Aug 3 (Reuters) – Japan and the United States conducted coordinated yen-buying intervention and will not hesitate to take further action, Japan’s finance ministry said on Monday, confirming a rare bilateral action to halt the yen’s slide to fresh 40-year lows.
The news underscores both countries’ resolve to prevent a sell-off in the yen and Japanese government bonds (JGB) from causing global spillovers, such as adding upward pressure on already rising U.S. Treasury yields, analysts say.
Preceding the announcement, President Donald Trump said on Sunday the United States was helping Japan to prop up the yen as a sign of friendship and to help the world economy.
“They have a weakening yen, and they wanted a little bit of help. And we’re always there for Japan,” Trump said in response to a reporter’s query why the U.S. is helping to support the yen.
The dollar fell 0.2% to 157.07 yen after Trump’s remarks, well off the 40-year high near 164 hit late last month, but rose back up to 157.70 yen after the ministry’s statement.
Japan has been struggling to curb a relentless drop in the yen that pushes up import prices and stokes broader inflation, hitting households’ wallets and Prime Minister Sanae Takaichi’s public approval ratings.
In its statement, Japan’s finance ministry said Friday’s yen-buying intervention with the U.S. Treasury Department “countered excessive volatility and disorderly movements in the Japanese yen in recent months”.
“The Japanese Ministry of Finance remains attentive and in close communication with our counterparts at the U.S. Treasury,” it added. “We will not hesitate to conduct further joint intervention.”
The joint intervention is the first since 2011’s coordinated action to weaken the yen after the devastating earthquake in eastern Japan.
Japan may have sold as much as $58.97 billion to buy yen when it intervened in New York markets on Thursday, Bank of Japan data indicated, before Friday’s confirmed joint intervention with the United States.
U.S. Treasury Secretary Scott Bessent also confirmed Friday’s effort, adding Washington “will not hesitate to participate in further joint intervention.”
“We strongly support Japan’s decisive market and monetary steps to correct the substantial undervaluation of the yen,” Bessent said in a separate statement on X, repeating his calls for further interest rate hikes by the Bank of Japan.
Bessent said the United States would consider increasing in coming months the size of the Federal Reserve’s repurchase facility providing temporary dollar liquidity, calling the tool an “important backstop”.
The comment came after the MOF’s rare X post on Saturday that it had “a broad range of tools to address market liquidity needs,” including access to the Fed’s repurchase facility providing temporary dollar liquidity.
The Fed facility, introduced in 2020 to steady markets during the COVID-19 pandemic, allows Japan to raise dollar liquidity without outright sales of U.S. Treasuries, potentially easing funding pressures on Tokyo for intervention.
In line with Bessent’s repeated calls for higher Japanese interest rates, the Bank of Japan on Friday offered its most explicit signal to date of an early rate hike, even as it kept monetary policy steady.
In a sign of broader policy coordination, South Korea stepped in to buy its won currency on Thursday.
Japan intervened in April and May, buying yen, causing only a brief rebound. The BOJ’s June rate hike to a 31-year high of 1% also gave the struggling currency little lasting boost.
(Reporting by Makiko Yamazaki and Leika Kihara in Tokyo; additional reporting by Steve Holland and David Lawder in Washington; Editing by William Mallard, Bill Berkrot and Sam Holmes)
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