Japan: Will Not Hesitate to Join Forces with the U.S. Again to Support the Yen if Necessary
The Japanese Ministry of Finance has confirmed that it has conducted joint foreign exchange intervention with the United States, stating clearly that it will not hesitate to take joint action again if necessary to support the yen.
This marks the first coordinated purchase of yen by Japan and the U.S. in 15 years, intervening as the yen fell to its lowest level in about 40 years. The U.S. Treasury also confirmed its participation and signaled the possibility of further actions. The market has previously seen a significant rebound in the yen.
The joint intervention directly targets yen short sellers and the unwinding of carry trades. Short-term funds are flowing out of short yen positions and shifting towards pricing the sustainability of the intervention; beneficiaries are institutions holding long yen positions or related assets, while those under pressure are cross-border funds relying on high-leverage carry trades.
Source: Public Information
ABAB AI Insight
Japan's previous unilateral interventions in the yen had limited effects, having attempted multiple times between 2022 and 2024 but failing to change the long-term depreciation trend. This upgrade to a joint action with the U.S. Treasury is the first bilateral coordination since 2011, indicating that unilateral tools are insufficient to cope with the strong dollar and carry trade pressures.
In terms of capital flow, the U.S. purchasing yen (estimated scale of $5-10 billion) and making public statements essentially injects "ally credit" backing into the market. The motivation is to stabilize global financial markets, manage the spillover effects of yen weakness on Japanese inflation and U.S.-Japan trade relations, while avoiding chaotic unwinding of carry trades that could impact U.S. Treasury and risk assets.
Similar cases can be seen in the coordinated interventions after the Plaza Accord in the 1990s and the joint response by the U.S., Japan, and Europe to excessive yen appreciation in 2011. Currently, the yen is in a policy counterattack phase after long-term depreciation, shifting intervention from "Japan acting alone" to "output of allied credit."
This essentially represents a regulatory change. The mechanism is that the joint statements from major reserve currency countries have altered market expectations regarding the limits of intervention, forcing short sellers to recalculate the risk premium of being squeezed out.
ABAB News · Cognitive Law
Unilateral intervention is a signal; joint intervention is the real credit injection.
The bottom line of the exchange rate is often determined by the willingness of allies rather than domestic reserves.
The greatest risk of carry trades is not the interest rate differential, but the sudden synchronization of policies.