Reuters, August 2 report: "Japan is expected to announce on Monday that, following the yen's plunge to a 40-year low, it has coordinated with the United States to intervene in foreign exchange markets to support the yen. Estimates suggest Japan has already spent nearly $59 billion on previous interventions, and this time will launch a joint currency-buying operation. The move aims to stabilize the yen's exchange rate, prevent widespread financial market turmoil, and demonstrate close coordination between Japan and the U.S."
Earlier, U.S. Treasury Secretary Scott Bessent was seen at Camp David during a cabinet meeting convened by Trump, with a notepad in front of him listing tasks: "Buy yen, $50–100 billion." Prior to this, Reuters reported that the U.S. Treasury had notified banks that the U.S. might enter the market to intervene in the yen's exchange rate.
Comments: The yen falling to a 40-year low hinges most critically on the massive interest rate gap between the U.S. and Japan—high U.S. rates versus very low Japanese rates. Global capital favors borrowing cheap yen, converting it into dollars to earn higher interest, leading to continuous selling of the yen and immense downward pressure. Additionally, Japan’s heavy reliance on imported energy means rising oil prices widen its trade deficit, further weakening the yen. Japan’s prolonged aging population, sluggish economic growth, and mounting government debt prevent the central bank from quickly raising interest rates significantly, making it difficult to narrow the interest rate differential swiftly.
This joint intervention by the U.S. and Japan to support the yen appears as synchronized efforts to stabilize the exchange rate, but each side has clear underlying motives. Japan has already expended nearly $59 billion in intervention funds, depleting its reserves; acting alone, it struggles to counter bearish pressure, making urgent U.S. participation essential. By leveraging U.S. dollar liquidity, Japan aims to amplify the impact of intervention and deter speculative attacks. Meanwhile, the U.S. agreeing to commit $50–100 billion isn’t purely out of alliance solidarity—it fears continued sharp yen declines could disrupt global capital flows, destabilize U.S. stock and bond markets, and trigger cascading financial risks. However, such intervention addresses symptoms rather than root causes. The deep structural interest rate gap remains the core driver behind the yen’s weakness. While injected funds can temporarily boost the yen and intimidate short sellers, as long as the interest rate structure remains unchanged, once the intervention ends, the yen will again face significant downside pressure. The battle between bulls and bears in the market is far from over.
Original article: toutiao.com/article/1872410093397193/
Disclaimer: This article reflects the personal views of the author