US-Japan pact to hit yen speculators followed months of preparation and rare public alignment of interests

By Leika Kihara, Makiko Yamazaki and Tamiyuki Kihara Mon, August 3, 2026 at 3:26 PM PDT | 6 min read

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TOKYO, Aug 3 (Reuters) – A joint U.S.-Japanese effort to fight off speculative bets against a battered yen last week followed months of preparation by the two nations and a rare, public alignment of interests in Washington and Tokyo over exchange rates.

While unilateral efforts by Japanese authorities to stop sharp yen selling in the past have failed to provide a firm floor for the currency, U.S. Treasury Secretary Scott Bessent's verbal support for a stronger yen has given bureaucrats in Tokyo a new tool in their fight this year.

Shared Currency Anxiety

For Japan, a weak yen has fanned import prices, creating cost-of-living headaches for successive governments, including that of current Prime Minister Sanae Takaichi.

For the U.S., a weak yen blunts the trade advantage from President Donald Trump's flagship tariffs, while a related sell-off in Japanese government bonds could spill over to U.S. Treasury yields.

The shared currency anxiety has forged increasingly close bilateral conversations about exchange rates—historically a diplomatically thorny topic for the two economic powers—and has added new pressure for the Bank of Japan (BOJ) to persist with rate hikes.

Early Preparations and Rare Rate Checks

U.S. participation in yen-buying intervention was considered as early as January, when the New York Federal Reserve made rare rate checks to help Tokyo combat yen declines, said a Japanese government official with knowledge of the preparations.

"Including online meetings, we've held talks about 10 times for discussions that included exchange rates," Japanese Finance Minister Satsuki Katayama said on Monday, describing how frequently she spoke with Bessent.

"When he visited Japan in May, we talked three-and-a-half hours including over dinner," Katayama said upon announcing Japan's joint currency intervention with the United States.

The May talks followed Japan's huge yen-buying intervention between late April and early May, which failed to reverse the yen's downtrend.

Intensifying Coordination

In a sign that negotiations were intensifying, Katayama said after the May meeting that the two sides had been "coordinating very closely on foreign exchange and will continue to do so."

Bessent, too, said Japan's fundamentals are "strong and resilient, and that will be reflected in the exchange rate."

He also repeated his calls for faster BOJ interest rate increases, signaling Washington's concern that the slow pace of hikes could leave the central bank behind the curve in addressing inflation.

A month later, the BOJ raised interest rates to a 31-year high of 1% in a landmark step toward policy normalization. However, with Japan's real borrowing costs deeply negative, the move failed to give a lasting boost to the sagging currency.

The U.S. Treasury was not reachable for comment outside office hours in Washington. Japan's finance ministry did not comment.

'Let's Congregate Tomorrow'

With the yen hitting a four-decade low this year, Japan's top currency diplomat, Atsushi Mimura, has shifted tactics.

Instead of a daily stream of calibrated verbal warnings against speculators, Mimura has focused on working behind the scenes with U.S. counterparts, said two sources familiar with the preparations.

That means Mimura, who has sway over when to step in, has been less public and has kept markets guessing about the chance of intervention. He kept a low profile even as Katayama and Bessent held an online meeting in late June to discuss financial market developments.

Heightened Need for Action

The need for action heightened in July, when concern over Takaichi's expansionary fiscal and monetary stance drove the yen to recent lows, pushing up the cost of imports and hurting the administration's approval ratings.

The U.S. administration was also grappling with rising inflation and Treasury yields, heightening the incentive to support Tokyo's effort to combat market headwinds.

Nodding to Japan's concern over the weak yen, the U.S. Treasury's semi-annual currency report on July 24 echoed Tokyo's warning against excessive yen volatility and pledged to continue "close consultations" with Japan on exchange-rate matters.

Both the U.S. Federal Reserve's and BOJ's policy meetings last week were seen as potentially vulnerable windows for the yen, as investors positioned themselves based on cues from both banks about the timing of future rate hikes. Japan's intervention campaign was subsequently launched.