The US and Japan supported the yen with a joint currency intervention
Summary
- The yen's exchange rate reached a nearly 40-year low against the dollar, prompting a joint currency intervention by Japan and the United States to stabilize it.
- The intervention involved exchanging dollars for yen, leading to a strengthening of the yen by over 1% against the dollar.
- US President Donald Trump described the intervention as a "gesture of friendship," while the US aims to prevent currency market volatility and rising long-term interest rates.
- The yen's weakness is attributed to the interest rate differential with Europe and the US, as the Bank of Japan lags in the interest rate hike cycle, but a rate hike is anticipated in September.
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Automatic translation: Originally published in Finnish 03/08/2026, 05:21 GMT. Give feedback here.
The yen's exchange rate has slipped to its lowest level in 40 years, and on Friday, Japan and the United States jointly intervened. Currency interventions are not common, and the United States has its own interests in them.
USD/JPY exchange rate
Source: LSEG
It was confirmed over the weekend that the sharp movements in the Japanese yen's exchange rate on Friday were the result of currency intervention. The yen had slipped to a nearly 40-year low against the dollar, but on Friday, the exchange rate saw a turnaround, immediately sparking speculation of intervention in the currency market. After the news was confirmed, the yen's exchange rate strengthened again by over 1% against the dollar and was still rising in the morning.
It was a joint operation by the United States and Japan, where Japan and the United States exchanged dollars for yen to support its exchange rate. US President Donald Trump described the currency intervention as a "gesture of friendship," but there are naturally other factors at play. The United States wants to avoid volatility in the currency market and the resulting rise in long-term interest rates, especially now that there has been pressure on them in the United States recently. Secretary of the Treasury Scott Bessent, in turn, communicated that preparations have been made for further actions if needed. Reuters reported that the Federal Reserve's repo program, initiated during the pandemic, could also be used to support the yen by providing dollar liquidity to Japan for buying yen. Such actions are not very common, as the last joint intervention occurred in 2011.
Policy rates, %
Source: LSEG
So why has the yen weakened? One of the main reasons for the movements is the increased interest rate differential with Europe and the United States. The Bank of Japan has clearly fallen behind in the interest rate hike cycle, which has caused a carry trade phenomenon where investors use yen to finance investments in higher-interest-rate countries. However, the Bank of Japan has already woken up to the situation, and the next interest rate hike is estimated for the September meeting, which would also support the yen.
