The United States and Japan last week held a coordinated intervention to halt the slide of the Japanese yen, which had fallen to a 40-year low against the US dollar. The yen dropped to 163 against the dollar for the first time since 1986, prompting the rare joint action by the two governments.

The yen is the world's third-most-traded currency, and its depreciation carries repercussions beyond Japan's borders. Following the intervention, the yen strengthened to 157 against the dollar by Wednesday.

This is not the first time the US has stepped in to support the yen; a similar intervention occurred during the Asian Financial Crisis in 1998. Since 2022, Tokyo has spent tens of billions of dollars defending the yen, but economic policies under successive Japanese leaders, including current Prime Minister Sanae Takaichi, have partially offset these efforts.

Economist Derek Tang, CEO of Monetary Policy Analytics, a US research advisory firm, cautioned that without changes to Japan's low-interest-rate environment, the latest intervention may be ineffective, describing it as “throwing good money after bad.”

Sources