Dickens said the intervention appears to have worked \u2014 for now.<\/p>\n
\u201cBut economists are of the overwhelming opinion that interventions in currency markets are a fool\u2019s game when they are trying to prevent depreciation that is being driven by fundamentals,\u201d he said.\u00a0<\/p>\n
Treasury Secretary Scott Bessent said Friday\u2019s action, which involved U.S. and Japanese officials jointly purchasing yen in the foreign-exchange market, was meant to counter \u201cdisorderly yen movements,\u201d referring to the currency\u2019s rapid slide to a roughly 40-year low against the dollar, according to data from the U.S. Federal Reserve<\/a>.\u00a0<\/p>\n \u201cTreasury remains attentive and in close communication with our counterparts at [Japan\u2019s Ministry of Finance] and [Bank of Japan]. We will not hesitate to participate in further joint intervention,\u201d Bessent wrote on X<\/a>.<\/p>\n The U.S.-Japanese joint intervention comes as the U.S. government continues to wage a stop-and-start war against Iran that has roiled global energy markets, driving up oil prices and putting renewed pressure on Japan, which imports nearly all of its crude oil and has no domestic production, according to the International Trade Administration, a federal agency that supports U.S. export markets.\u00a0<\/p>\n Those higher energy costs have weakened the yen and threatened to fuel inflation in one of the world\u2019s largest economies, a prospect that experts say would drag both economies, which are deeply intertwined through trade, investment and financial markets. Japan is also the largest foreign holder of U.S. Treasury securities, with more than $1.14 trillion in holdings, according to U.S. government data.\u00a0<\/p>\n The deeper issue for the yen, according to Northeastern University\u2019s Fabricius Somogyi<\/a>, who studies international finance, is Japan\u2019s deteriorating fiscal position, where a massive debt load has constrained monetary policy by making higher interest rates far more costly for the government.<\/p>\n \u201cThe fiscal situation in Japan, the fact that the government\u2019s balance sheet \u2014 government debt in Japan \u2014 has blown up massively over the past couple of decades,\u201d said Somogyi, Joseph G. Riesman Research Professor. \u00a0<\/p>\n Somogyi said the Bank of Japan has spent years buying government bonds to keep interest rates low, which in turn helps contain the government\u2019s borrowing costs as it carries one of the world\u2019s largest public debt burdens. Higher interest rates, he said, would make it significantly more expensive for Japan to refinance that debt.<\/p>\n Japan\u2019s gross public debt is at 227.8% of gross domestic product, GDP, in 2026, by far the highest among advanced economies, according to the International Monetary Fund<\/a>. Underlying the fiscal crisis is a demographic issue: Japan\u2019s aging, shrinking population has increased government spending on pensions and healthcare while slowing economic growth and tax revenue, Somogyi said.\u00a0<\/p>\n Dickens said that the \u201cfundamentals are against the Yen,\u201d noting that Japan\u2019s comparatively low interest rates, a trade balance strained by expensive energy imports and uncertainty over future economic policy all encourage investors to favor other currencies, creating pressures that currency intervention alone is unlikely to overcome.<\/p>\n Japan\u2019s low interest rates mean investors can borrow yen at relatively low cost and exchange those funds for dollars, which can be used to invest in U.S. assets with higher yields, experts say. All told, that increases selling pressure on the yen, which has contributed to its prolonged decline against the dollar.\u00a0<\/p>\n \tNortheastern Global News, in your inbox.<\/p>\n Sign up for NGN\u2019s daily newsletter for news, discovery and analysis from around the world.<\/p>\n Those forces have driven the yen to its weakest level against the U.S. dollar in roughly 40 years, or nearly \u00a5164 per U.S. dollar in late July, according to Federal Reserve exchange-rate data.\u00a0<\/p>\n Dickens said he sees one of several ways the situation resolves. As long as oil prices remain elevated, Japan will be running \u201chuge trade deficits\u201d that will continue to depress the currency. He said that unless oil prices fall, the United States and Japan will eventually have to either abandon the intervention, or face off against currency speculators betting the yen will continue to weaken.<\/p>\n \u201cIn these situations, the speculators almost always win,\u201d he said.<\/p>\n Somogyi said what comes next depends on identifying the exact \u201croot cause\u201d of the currency crisis, but concurred that traders might get the last word.\u00a0<\/p>\n \u201cMaking predictions is hard, of course, but I think what it\u2019s ultimately going to depend upon is how much confidence investors have and how much confidence currency traders eventually have in this intervention,\u201d he said.\u00a0<\/p>\n Tanner Stening is an assistant news editor at Northeastern Global News. Email him at t.stening@northeastern.edu. Follow him on X\/Twitter @tstening90<\/a>.<\/p>\n![\"Headshot](\"https:\/\/www.europesays.com\/japan\/wp-content\/uploads\/2026\/08\/neu_m044k899t.jpg\")
William Dickens said the coordinated move by the U.S. and Japan to buy yen reflects a fairly complex set of forces. Photo by Matthew Modoono\/Northeastern University<\/p>\n![\"\"](\"https:\/\/www.europesays.com\/japan\/wp-content\/uploads\/2026\/08\/EmailGraphic.png\")
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