Japan’s finance ministry announced on Friday that it spent a record 15.4 trillion yen ($96 billion) intervening in currency markets between late July and late August in an effort to strengthen the yen. This marks the largest monthly foreign exchange intervention on record for Japan, aimed at mitigating economic disruption caused by sharp fluctuations in exchange rates.
The Bank of Japan conducted the market intervention under directions from the finance ministry during the period from July 30 to August 26, though specific dates of the transactions were not disclosed. The recent moves came after the yen weakened to a four-decade low, driven by a widening interest rate gap between Japan and the United States, soaring oil prices, and investor concerns over Prime Minister Sanae Takaichi’s planned spending, which could further raise Japan’s already substantial public debt.
On July 31, Japan and the United States jointly intervened in the currency markets for the first time in 28 years to support the yen. U.S. President Donald Trump publicly acknowledged the coordinated action, describing it as a “signal of friendship” and beneficial for the global economy. The intervention followed the yen’s drop to 163.99 per dollar, its lowest level since 1986, before briefly strengthening to 157.40. As of Friday, the yen was trading around 159.6 against the U.S. dollar.
Historically, the last joint U.S.-Japan purchase of yen occurred in 1998, while the last intervention by the two countries in tandem was in 2011, when they sold yen alongside other G7 nations to counteract a post-earthquake surge. Experts have noted that the Trump administration’s support for a weaker yen aligns with efforts to reduce the U.S. trade deficit, as a lower yen enhances the competitiveness of Japanese exports, including major companies like Sony and Toyota. It also facilitates Japan’s planned $550 billion investment in the U.S. under a 2025 trade agreement.
While a weaker yen benefits Japanese exporters, it raises import costs for Japan, a country heavily reliant on foreign energy and raw materials. This challenge is amplified by the ongoing conflict in the Middle East, which is disrupting oil supplies and pushing prices higher. Despite previous intervention attempts and public warnings from Finance Minister Satsuki Katayama signaling readiness to act, the yen has continued to experience downward pressure.
Tokyo’s recent interventions reflect ongoing concerns about the economic impact of currency volatility, particularly given Japan’s dependence on imports and the broader geopolitical uncertainties affecting global markets.