White House props up yen against backdrop of Washington-Tokyo trade deal
In an exceedingly rare move, the US government over the weekend directly intervened in the foreign exchange market for the first time since 2011, moving to prop up the Japanese yen as the White House seeks to reinforce its economic relationship with Tokyo and stabilize a key trading partner’s currency. The dual intervention by Japan’s…
In an exceedingly rare move, the US government over the weekend directly intervened in the foreign exchange market for the first time since 2011, moving to prop up the Japanese yen as the White House seeks to reinforce its economic relationship with Tokyo and stabilize a key trading partner’s currency.
The dual intervention by Japan’s Ministry of Finance and the US Treasury Department to support the yen appeared on Monday to be pushing the currency in the right direction, as the exchange rate held around 156 after a tumultuous week that saw the first explicit intervention by the US in the foreign exchange (FX) market since 2011.
Over the past month, the yen’s value has slid against the dollar, hitting its lowest relative value since 1986 on July 23. The currency’s downward movement has driven a surge in import prices and living costs in the island country, exacerbating an already worsening inflationary environment in an intensely import-dependent economy.
That picture began to shift abruptly at the end of last week, when the Japanese Ministry of Finance and its central bank executed its second major intervention within three months, selling roughly US$36 billion — according to trading specialists who study flow data — to buy yen and prop up the currency.
Making the move more interesting for global FX and rates markets was the US Treasury Secretary’s decision to join the operation, reportedly selling euros to buy yen in the department’s first official FX market intervention since 2011. Treasury Secretary Scott Bessent said after the initial confirmation that the US was ready to do so again, as new trade agreements have given Washington a stronger interest in preventing a sharp depreciation in the yen from undermining the pact.
The intervention marks an unusual moment in global currency markets. Governments almost never step into the $7.5 trillion-a-day foreign exchange market, and when Washington does, it has historically been reserved for periods of severe market dysfunction or coordinated action with allies. Treasury Secretary Scott Bessent said on Sunday that the Treasury Department remains ready to step in again if needed.
“The Trump Administration delivers for America’s trusted partners. Economic security is national security. And the U.S.-Japan alliance is built on both,” Bessent said in a post on X. “We will not hesitate to participate in further joint intervention.”
A notepad in front of Treasury Secretary Scott Bessent reads “To Do Buy Japanese Yen $5-10 bil” as he participates in a Cabinet meeting at Camp David, Maryland, on July 31, 2026. (Reuters/Daniel Heuer) ·Reuters / REUTERS
The move also underscores how rapidly concern has grown over the yen’s collapse and how the US could be impacted as President Trump has pursued sweeping trade deals with Sanae Takaichi’s government in Tokyo.
“The decision to launch intervention on July 30 should reflect a strong determination by the authorities to support the yen,” Bank of America FX strategist Shusuke Yamada said in a note on Monday. “Moreover, the fact that the operation was coordinated suggests that extensive currency diplomacy took place beforehand.”
In July 2025, the two countries announced a wide-ranging trade agreement that moved their economic relationship away from its traditional free-trade orientation and toward the tariff-led framework President Trump has sought from major trading partners.
The landmark agreement reduced the tariff on most Japanese imports to 15%, down from the previously threatened 25%, in exchange for a broad package of Japanese concessions. Tokyo pledged up to $550 billion in investment into strategic US industries — including manufacturing, semiconductors, energy, and critical minerals — while also agreeing to expand purchases of US agricultural products, energy exports, aircraft, and defense equipment.
Since then, the agreement has been implemented through a series of smaller project announcements. In February 2026, Washington and Tokyo unveiled the first roughly $36 billion of investments under the framework, including a major gas-fired power plant, a deep-water crude oil export terminal, and an industrial diamond manufacturing facility. A second round announced in March 2026 expanded the partnership into additional natural gas infrastructure and small modular nuclear reactor projects.
A weaker Japanese currency could complicate that arrangement by making American goods more expensive for Japanese buyers, potentially undercutting Japan’s commitments to purchase more US products. Yen depreciation also raises the domestic cost of imported energy, food and raw materials, adding to inflationary pressures even as the Bank of Japan keeps interest rates relatively low compared with other major economies.
The move also comes at a pivotal moment for the US government bonds market.
After the Federal Reserve voted on Wednesday to keep the US target interest rate unchanged, yields on 30-year Treasurys climbed to decades-long highs, crossing 5.20 to reach the highest levels seen since 2007. Japan is the largest foreign holder of US Treasurys, and any sustained selling of the government bonds could pressure yields even higher.
The Bank of Japan has access to the Foreign and International Monetary Authority Repo Facility (FIMA Repo Facility), which allows certain central banks to use Treasury holdings as collateral to borrow dollars, rather than liquidating Treasurys for cash.
That option, which Bessent encouraged on Sunday, could help alleviate concerns about Japan’s selling of Treasury Holdings, though it wasn’t clear on Monday exactly how the Bank of Japan had funded its yen purchases.
“The degree to which both governments have presented a united front is notable, both in emphasizing the potential firepower behind Japan’s yen-buying intervention and in limiting any adverse impact on the U.S. Treasury market,” Bank of America’s Yamada wrote.
Rather than selling dollars outright, the Treasury Department reportedly sold euros held in its Exchange Stabilization Fund to finance the purchases of yen. Strategists said the approach allowed Washington to support Japan’s currency without sending an explicit signal that it wanted a weaker dollar — a message that could have complicated inflation expectations or Treasury markets as long-term yields remain near multidecade highs.
That said, even with the decision by the US Treasury to sell euros, there may be limited room for further intervention by the US, according to JPMorgan strategist Junya Tanase. The US Treasury’s Exchange Stabilization Fund, designed for moves like that of the Treasury to prop up the yen, held roughly $13 billion of euro-denominated assets and roughly $25.5 billion of dollar-denominated assets at the end of June, per Tanase.
It’s unknown exactly how much the Treasury Department spent in this round of intervention, but the size of its reserves earmarked for such moves is relatively slim compared to earlier Japanese interventions in the yen, which were sized between $30 billion and $60 billion.
Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional
Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
