Japan’s Vice Minister of Finance for International Affairs Atsushi Mimura speaks to the press about the joint Japan-U.S. currency market intervention to prop up the historically weak yen, at the Finance Ministry in Tokyo’s Chiyoda Ward, Aug. 3, 2026. (Mainichi/Naomichi Senoo)
The responsibility for securing confidence in the yen as a currency rests with the Japanese government. Relying on the United States will not overcome the negative spiral of a weaker yen and higher prices.
In response to the yen’s historic depreciation, the Japanese and U.S. governments have moved to buy yen in the market. It is the first coordinated intervention in 15 years, since 2011, when the yen surged immediately after the Great East Japan Earthquake. It is the first yen-buying intervention in 28 years, since 1998, when Japan fell into a financial crisis over bad-loan problems at Japanese banks.
Such a move is unusual outside of a major disaster or a global economic crisis. That is because it could distort financial markets.
This time, the political calculations of Prime Minister Sanae Takaichi’s administration and the administration of President Donald Trump in the United States aligned. Japan had repeatedly intervened on its own to buy yen and sell dollars, but those efforts failed to correct the yen’s weakness, and Tokyo had been hoping for help from Washington.
With congressional midterm elections coming in November, the United States was concerned that the negative effects of “selling Japan” — a simultaneous weakening of the yen and rise in long-term interest rates — would spill over into its own economy. U.S. Treasury Secretary Scott Bessent, who led the coordinated intervention, was deeply wary that turmoil in Japanese markets would push up U.S. long-term interest rates.
Japan has, in effect, incurred a major debt to the United States. President Trump has been emphasizing that Japan “wanted a little bit of help.” Washington may seek something in return, such as the early completion of the $550 billion, or about 86 trillion yen, in investment in the United States that Japan promised under the Japan-U.S. tariff agreement.
The Takaichi administration is touting the move as “the completed form of the Japan-U.S. currency alliance,” but intervention alone will not easily reverse the stream of yen selling.
At the root of the yen’s weakness is market distrust of the Japanese government’s economic policies, which disregard fiscal consolidation and independent monetary policy.
The U.S. side argues that an early interest rate hike is essential to correcting the yen’s weakness. Monetary policy, however, is something the Bank of Japan should decide. To put the brakes on the weaker yen and higher prices, it is only natural to raise the policy rate, which is far too low relative to the inflation rate.
It is also essential that the Takaichi government change its irresponsible fiscal policy. If it forces through a consumption tax cut without identifying a funding source or presses ahead with fiscal expansion, long-term interest rates will rise further.
There are limits to the stopgap method of coordinated intervention. It is time for the Japanese government to review economic policy itself to restore market confidence.