Editor’s observe: He Weiwen is a senior fellow on the Center for China and Globalization. The article displays the creator’s opinions and never essentially the views of CGTN.
Japanese Finance Minister Satsuki Katayama speaks to reporters on the Ministry of Finance after Japan and the US performed a coordinated intervention to assist the yen in Tokyo, Japan, August 3, 2026. /VCG
The current US-Japan coordinated intervention within the overseas alternate market aimed toward supporting the yen, the primary such motion because the Asian Financial Crisis in 1998, produced a direct influence. However, whether or not it may possibly ship a long-lasting restoration for the Japanese foreign money stays unsure.
US Treasury Secretary Bessent disclosed a deliberate buy of $5 billion to $10 billion price of yen on July 30, and the BoJ (Bank of Japan) spent $52.8 billion buying yen, propping the foreign money up from 163 to 157.5 towards the US dollar. The Federal Reserve Bank of New York began the “exchange rate check”, triggering main buyers, together with Goldman Sachs and JP Morgan, to purchase yen within the New York overseas alternate market.
The restoration of the yen continued into early August, reaching157.65 per dollar on the morning of August 4, greater than 4 p.c stronger than its pre-intervention low of 164 yen per dollar.
The rapid set off for the intervention was the yen’s sustained decline, which has turn into more and more troublesome for policymakers to disregard. On July 24, the yen alternate price was 163.71 to a dollar, down 9.7 p.c from the identical interval a 12 months earlier. During this era, the dollar broad alternate price index stood just about unchanged, at 120.7105 on July 24, 2026 vs. 120.4082 on July 24, 2025. Over the identical interval, the yuan strengthened 5.6 p.c towards the dollar, whereas the euro and pound declined by 3 p.c and 0.6 p.c, respectively. This comparability highlights that the yen’s sharp depreciation has been pushed by components past broad US dollar actions, making it a rising concern for policymakers. BoJ, the Japanese central financial institution, had already intervened within the foreign money market in March, however the influence was restricted.
The actual fear for Washington is that Japan has little alternative however to promote its dollar property to assist the yen, with US Treasury payments being its largest dollar-denominated asset, totaling $1.143 trillion in May 2026.
The huge sell-off of US Treasury payments will result in a better premium and, in flip, a better debt service burden on the US federal funds. It will even improve volatility in world bond markets, threatening monetary stability within the US. During the three months from February to May 2026, Japan reduce its holdings of the US Treasury payments by $96.2 billion, largely associated to the huge intervention by the BoJ to assist the yen in late April to early May when it purchased 11.73 billion yen ($73.6 billion). Meanwhile, the US nationwide debt stored rising at $6-7 billion per day and broke the $40 trillion barrier on August 2. Hence, Washington’s intervention is just not for “friendship”, as described by Donald Trump, however for its personal curiosity.
The Ministry of Finance constructing in Tokyo, Japan, August 3, 2026. /VCG
Clever sufficient, the US Treasury Department and the Federal Reserve Bank of New York haven’t spent many {dollars}. Bessent simply disclosed a observe, displaying Washington’s stance of supporting the yen, whereas the Federal Reserve Bank of New York began an “exchange rate check”, displaying no tolerance for additional market hypothesis towards the yen. It additionally permitted the usage of FIMA facility, that means no have to promote the US Treasury invoice. In actual intervention, they had been additionally intelligent sufficient to not promote {dollars}, however euros, to assist yen. In a phrase, yen is supported by Washington, with a restricted quantity of {dollars}. It was Japan that has spent roughly $87 billion in late July to early August.
The US-Japan joint intervention is just not a mere financial and monetary transfer, but additionally entails a strategic consideration. It is tough to know why Washington has supported the yen however by no means the euro. In the late 1990’s, the euro as soon as broke parity with the dollar, almost 20 p.c off its degree at $1.17 when it began in 1992. Washington simply seemed on. This time, Washington offered euros to assist the yen, not worrying concerning the euro’s fall. The euro is by much more vital than the yen on the earth financial system. In June 2026, the euro accounted for 20.07% of world reserve foreign money and 21.88% of settlement, whereas the yen accounted for five.8% and three.66%, respectively.
It is extensively estimated that the present yen rebound can be restricted as a result of the intervention doesn’t handle the deeper components weighing on the foreign money. It rose to the 157 per dollar space on July 30 after the joint US-Japan intervention, then stayed at this degree within the following buying and selling days. There is little hope that the yen will return to the 140s within the coming months.
There are 4 basic components for yen weak point vis–vis dollar.
Firstly, the broad central financial institution rate of interest hole stays a significant component behind yen weak point. The BoJ has stored the speed at 1%, which is a big soar in contrast with zero rates of interest for many years, and there’s little room for additional rises. Secondly, tensions within the Middle East over the previous few months have considerably disrupted Japan’s power provide, whereas the US has remained protected. The yen’s power will rely upon the decision of disruptions round the Strait of Hormuz. Thirdly, the financial fundamentals of Japan don’t assist a robust yen. Economic stagnation, deflationary pressures, and an growing older inhabitants are unlikely to vary considerably within the foreseeable future. Fourthly, the federal government might take into account measures resembling reducing the meals consumption tax price from 8% to 1% to cushion the influence of import inflation brought on by yen weak point.
An digital board shows the newest present alternate price of the Japanese yen towards the Euro in Minato Ward, Tokyo, August 5, 2026. /VCG
Due to Japan’s extraordinarily excessive authorities debt ratio, at 260% of its GDP, there are restricted fiscal sources out there to implement such measures.
The present US-Japan joint intervention to assist the yen will most definitely present short-term aid, serving to pull the yen from the 160s to the 150s. It stays to be seen if it might recuperate to the 140s, or the extent of a 12 months in the past, and if the Asian currencies, particularly the Republic of Korea gained, might preserve their rally. What deserves better consideration is whether or not world monetary markets can stay secure after the joint intervention ends.
In view of the yen’s continued weak point and the challenges going through the Japanese financial system, an vital query stays: Will joint US-Japan intervention happen once more within the close to future, and even turn into a brand new coverage norm? It will rely upon two components: Firstly, whether or not the yen’s decline turns into extreme sufficient to threaten US financial and monetary pursuits; Secondly, whether or not Washington continues to see strategic advantages from such intervention.
As defined above, the restoration of the yen is prone to be short-term, and underlying financial fundamentals proceed to level to future dangers. We ought to comply with developments in world financial markets and dangers. Apart from potential future joint intervention by central banks, the International Monetary Fund ought to play a extra vital position in monitoring and coordinating central banks’ efforts to keep up world monetary stability, thereby supporting the world financial system as a complete.
(Cover through VCG)
Source: CGTN