US and Japan Step In to Support Yen After Slide to 40-Year Low

The United States and Japan have carried out their first coordinated yen-support operation since 1998, moving to arrest a sharp selloff that briefly pushed the currency to a roughly 40-year low near 164 per dollar. Japan's Ministry of Finance and the US Treasury acted over July 30'31. Japan's portion of the intervention is estimated at $59 billion to $85 billion. In the operation, Japan bought yen in size, while the US Treasury sold euros to buy yen. Japanese Finance Minister Satsuki Katayama and US Treasury Secretary Scott Bessent confirmed the action publicly, and President Donald Trump also acknowledged US participation. The yen strengthened to around 155 per dollar after the move, but the rebound proved short-lived. By mid-August, it had eased back into the 158'160 range. Rate divergence remains the core driver. The Federal Reserve has kept policy rates elevated, while the Bank of Japan continues to run historically low rates, keeping yen-funded carry trades attractive for global investors. Japan's widening energy import costs are adding pressure as well. With Middle East geopolitical tensions lifting the country's import bill'and Japan importing nearly all of its oil and natural gas'more yen is being sold to pay for overseas energy purchases. The last joint intervention to support the yen dates to 1998 during the Asian financial crisis. Katayama and Bessent indicated they are prepared to intervene again if conditions worsen. Markets are also watching the Bank of Japan. A rate hike would narrow the gap with US yields and reduce the appeal of carry trades. Governor Kazuo Ueda has been cautious about tightening, though sustained yen weakness could eventually force a policy response. US officials framed their participation in broader stability terms, citing concerns that a disorderly yen slide could spill over into US Treasury markets and tighten global funding conditions.