(Japan, 2nd) Japanese Finance Minister Katsuki Katayama is expected to announce on Monday (August 3) that Japan and the United States have jointly intervened in the foreign exchange market to prevent the yen from falling to its lowest level in 40 years.
Two Japanese government officials told Reuters that Katayama will emphasize the determination of both Japan and the US to curb what they deem to be excessive depreciation of the yen. One of the sources confirmed that the two countries took “joint action,” saying the intervention is still ongoing.
The Japanese Ministry of Finance and the US Treasury have yet to respond to requests for comment.
Market sources said Japanese and US authorities have recently purchased yen multiple times. This is the first joint intervention by the two countries in the forex market since 2011, aiming to shore up the yen, which has fallen to its lowest level against the US dollar since 1986.
A market source revealed that the Japanese government bought yen and sold US dollars during the New York trading session on Thursday (July 30). Hours later, on Friday, the Bank of Japan kept its monetary policy unchanged but gave clear signals it could hike rates earlier than expected.
Last week, US Treasury Secretary Besant said that the yen appeared to him to be “severely undervalued.” Images taken by Reuters showed that on Friday (31st), while attending a Cabinet meeting, Besant’s notebook included a to-do list that said “purchase 5 to 10 billion USD worth of yen.”
Another source said the US Treasury has informed several banks that it might intervene in the yen market and has asked them to be prepared for subsequent action.
The depreciation of the yen also means that the US dollar strengthens, which not only risks worsening the US trade imbalance but may also trigger market turmoil. The joint purchases of yen by Japan and the US can magnify the impact of the intervention and send a strong signal to markets that the two countries will act together to stem the yen's further rapid decline.