Japan and the United States jointly intervened in the foreign exchange market to buy yen on 31 July, moving the yen toward appreciation. The yen rebounded to the 155 range after the intervention, with the interest-rate differential between Japan and the United States, the risks of excessive yen depreciation and the benefits for the US cited as factors behind the move.
Japan and the United States jointly intervened in the foreign exchange market to buy yen on 31 July. The market described this as an exceptional event, marking the first such action in approximately 28 years.
After the intervention was announced, the yen temporarily strengthened, advancing to the 155 range.
Market participants are said to have explained the purpose of the intervention by pointing to the fact that excessive yen depreciation makes Japanese products imported into the United States cheaper, posing a threat to US industry.
One notable feature was that Japan’s Ministry of Finance introduced a new mechanism for borrowing dollars using US Treasuries as collateral instead of selling them.
The move is believed to have been intended to avoid a decline in US Treasury prices and a rise in interest rates, and attention is now focused on developments surrounding yen-buying intervention by Japan and the United States.