US-Japan cooperation supports the yen, forex intervention may become the new normal

The United States' support for Japan's efforts to stabilize the yen is deepening, with coordination between the two countries in the foreign exchange market reaching levels rarely seen in decades. On Thursday, Japan is suspected to have intervened by purchasing yen, estimated at approximately $53 billion; meanwhile, US authorities conducted a “rate check” with banks, which the market interprets as a precursor to forex intervention. US Treasury Secretary Bessent commented that the yen is “seriously undervalued” and excessive volatility is unhealthy. Nobuyasu Atago, Chief Economist at Rakuten Securities Economic Research Institute and former Bank of Japan official, stated: “Bessent's influence is very significant. The US is now becoming increasingly cooperative with Japan’s intervention actions.” The timing of Thursday’s moves has also drawn market attention, occurring between rate decisions by the Federal Reserve and the Bank of Japan. This has fueled market speculation that monetary policy may also be part of coordination between Tokyo and Washington. On Friday, Japanese officials remained vague about whether intervention had taken place, but they clearly emphasized the coordinated support from the US. Jun Mimura, Japan’s top currency official at the Ministry of Finance, noted that US assistance was not just “moral support.” Atago said: “I can’t help but feel they are thinking not only in terms of coordination on exchange rates, but also tacit cooperation at the level of monetary policy.”