Japan and the United States carried out their first coordinated intervention to support the yen since 1998 on July 30-31. Japan’s portion of the operation is estimated between 59 and 85 billion dollars. After briefly hitting a 40-year low near 164 yen per dollar, the yen strengthened to approximately 155 yen before sliding back to the 158-160 range by mid-August. The sustained weakness of the yen is driven by the gap between US interest rates held high by the Federal Reserve and Japan’s historically low rates maintained by the Bank of Japan, which keeps the carry trade profitable. Both US Treasury Secretary Scott Bessent and Japanese Finance Minister Satsuki Katayama indicated that further intervention remains possible if conditions deteriorate.
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