US and Japan launch coordinated intervention to support yen

The United States and Japan have initiated a coordinated effort to stabilize the yen, marking the first joint currency intervention in 28 years. To support the currency, the Bank of Japan has reactivated a repurchase mechanism established during the COVID-19 pandemic, allowing it to use over $1 trillion in U.S. Treasury assets as collateral to borrow dollars from the Federal Reserve. This arrangement, announced by U.S. Treasury Secretary Scott Bessent and supported by President Trump, has been described by Japanese officials as a “U.S.-Japan monetary alliance.”

Following this intervention, market sentiment has shifted. Data from the Commodity Futures Trading Commission (CFTC) shows that leveraged funds have reduced their net yen short positions by more than half since the joint action began. While the yen has retraced some of its initial gains, trading near the 160 level continues to keep investors alert to the possibility of further intervention. Analysts suggest that authorities may act again if the yen approaches the 162 level, which served as a critical threshold during previous market volatility.