Scott Bessent, U.S. Treasury Secretary. Reuters-Yonhap News
Japanese media have criticized a rare joint market intervention by the United States and Japan to counter the weak yen, describing it as reminiscent of a “currency defeat.” The assessment stands in direct contrast to that of Atsushi Mimura, Japan’s vice minister of finance for international affairs and the finance ministry’s point person on currency policy, who late last month called the joint U.S.-Japan intervention “the completed form of the U.S.-Japan monetary alliance.”
Japan’s Nikkei, in an article headlined “The U.S.-Japan Coordinated Intervention Is a ‘Currency Defeat,'” reported on the 12th that Japan “should feel a greater sense of crisis over a currency defeat in which it could not halt the yen’s decline on its own and had to ask the United States for help.”
The Nikkei noted that a similar joint intervention, in which the two countries cooperated to buy up the yen intensively, also took place 28 years ago. In June 1998, Japan was in the midst of a financial crisis. The collapse of its bubble economy triggered a flood of bad debt, compounded by the spillover from the Asian financial crisis. The yen, which had traded in the 110-per-dollar range in June 1997, fell to 146 the following year.
The turning point in halting the yen’s slide came largely thanks to U.S. help on June 17 of that year, when the two countries intervened in the market by buying yen. Then-Prime Minister Ryutaro Hashimoto shared with then-U.S. President Bill Clinton the view that “yen stability is important for Asia and the global economy,” and Japan promised the United States it would respond swiftly to the bad-debt problem at its financial institutions.
The Nikkei pointed out that the joint intervention last month and the one in 1998 took place under unequal circumstances. U.S. President Donald Trump said on the 2nd that “Japan came to us asking for help because the yen was falling,” describing the joint intervention as a “deal” from which the United States could gain financially, much like its stake in Intel. In 1998 as well, then-U.S. Deputy Treasury Secretary Lawrence Summers, in his 40s, met one after another with senior Japanese officials regardless of rank and pressed that “Japan needs to take action.” U.S. Treasury Secretary Scott Bessent likewise urged the Japanese government to act over the latest intervention, saying the yen “will return to a more normal equilibrium price if Japan continues to implement appropriate policies going forward.”
The Nikkei said that “even though it knows what needs to be done, the Japanese government has failed to produce the right policies,” attributing the recent yen weakness ultimately to slow interest-rate increases and loosened fiscal discipline. Because the underlying problems have not been resolved, the paper argued, the yen-support effect has weakened despite repeated warnings and market interventions by Finance Minister Satsuki Katayama and Vice Minister Mimura.
It added that “the Japanese government knew in June 1998 as well that it needed to accelerate the disposal of bad debt but failed to produce fundamental measures,” and recommended that “the government should seize the ‘window of opportunity’ opened by the coordinated intervention to shift its policies.”