Yen intervention aimed to prevent Asian instability, US says

US Treasury Secretary Scott Bessent said the United States joined Japan in buying yen because further weakness in the currency risked affecting other Asian markets, giving Washington’s explanation for last week’s first coordinated yen-buying intervention since 1998.

The yen had fallen to almost 164 per dollar, a four-decade low, before Friday's operation. Japanese Finance Minister Satsuki Katayama said Tokyo and Washington acted to counter “excessive volatility and disorderly movements” in the yen.

US President Donald Trump called the move a “signal of friendship” with Japan, and Bessent has said the United States would not hesitate to join further intervention.

Bessent told CNBC on Tuesday that, in his opinion, an overly weak yen helped trigger part of the Asian financial crisis in the late 1990s. He said a stable yen was important for the United States and the wider region, warning that if the yen weakened substantially, other currencies would follow.

He cited excess volatility in the Korean won and said many people believe China's renminbi is undervalued. He also pointed to trade flows, the size of Japan's economy and Japan's role in global savings markets as reasons a stable yen matters.

The scale of Friday's operation has not been disclosed. The Financial Times, citing people familiar with the matter, reported that the Federal Reserve Bank of New York sold euros to buy yen on behalf of the US Treasury. Analysts cited by the Financial Times estimated Japan's possible intervention at about 8.45 trillion yen, or $52.8 billion, while Nikkei put the amount at between 6 trillion and 7 trillion yen.

The yen was trading on Wednesday around 4 percent above last month's low. It had risen to 157.40 per dollar on Friday and briefly touched 155.23 on Monday.

The currency's slide has been linked to the gap between Japanese and US interest rates, high oil prices and concerns about Prime Minister Sanae Takaichi's spending plans adding to Japan's debt. The Bank of Japan raised rates in June to 1.0 percent and held them there last week, while the US Federal Reserve's range was 3.50 to 3.75 percent.

Goldman Sachs researchers said the intervention would probably be only a temporary reprieve unless reinforced by a material change in the global growth outlook or Japan's domestic policy mix. They said they were sceptical that US Treasury involvement signalled major domestic policy changes in Japan, and saw it as more likely a low-cost way to work with Japanese officials to limit unwanted volatility in the US Treasury market.