Yen hits three-month high after US and Japan joint intervention

The Japanese yen reached its strongest level in three months on Monday, trading at ¥155 against the US dollar, after Japan and the United States carried out a rare joint operation to support the currency. Japan's finance ministry confirmed that the two governments conducted coordinated yen-buying intervention late last week and stand ready to take further action if needed.

The intervention came after the yen had weakened to a 40-year low of almost ¥164 per dollar the previous week. US President Donald Trump told reporters on Sunday that Japan wanted a little help and that the US is always there for Japan.

The yen had been under pressure in recent months because Japanese borrowing costs remained lower than in other advanced economies. This disparity fueled the so-called "carry trade," where investors borrowed cheaply in yen to buy higher-yielding dollar assets. Additionally, investor concerns about Japanese Prime Minister Sanae Takaichi's push for tax and spending measures to stimulate the economy, as well as her criticism of the Bank of Japan's interest rate hikes, contributed to the currency's weakness.

US Treasury Secretary Scott Bessent said Washington "will not hesitate to participate in further joint intervention," while repeating calls for additional rate increases from Japan's central bank. On Saturday, a photograph of Bessent's notebook taken during a cabinet meeting showed his "to do" list included buying $5bn-$10bn worth of Japanese yen.

This marks the first collaboration between Japan and the US on currency intervention since March 2011, when they jointly acted to weaken the yen following the Tohoku earthquake and tsunami.

Lee Hardman, a currency analyst at MUFG bank, said the threat of further joint intervention and a faster pace of Bank of Japan hikes should provide more support for the yen and discourage speculators from running elevated short positions. However, consultancy Oxford Economics argued that the coordinated intervention would not be enough to reverse the yen's weakening trend. It expects the Bank of Japan to wait until December, as the intervention reduces the risk of a sharp yen depreciation and gives the central bank more time to assess the impact of the Middle East conflict and past rate hikes on the economy.