Japan's Finance Ministry confirmed Monday that it ran a coordinated yen-buying operation with the U.S. Treasury on Friday, and the yen extended its rally for a third straight session as a result. Analysts at UBS and HSBC say the move buys time rather than fixing the currency's underlying weakness.
The yen climbed for a third straight session on Monday, touching an intraday high of 155.20 per dollar, its strongest level in about three months, before paring some of the gains. It last traded up 0.39% at 156.76 per dollar.
Tokyo and Washington confirm joint action
Japan's Finance Ministry said Monday it had conducted a coordinated yen-buying operation with the U.S. Treasury on Friday, marking a rare joint move by the two allies to stem sharp swings in the currency. According to CNBC: “will not hesitate to conduct further coordinated interventions in the future”, the ministry said, adding that it remains in close communication with the U.S. Treasury.
U.S. Treasury Secretary Scott Bessent also confirmed the action, saying Friday's coordinated foreign-exchange moves countered disorderly yen movements, and that Treasury will not hesitate to join further joint intervention. President Donald Trump said Sunday the U.S. took part as a gesture of support for Japan, pointing to the two countries' good relationship.
Wall Street doubts a lasting rebound
UBS strategists Teck Leng Tan and Dominic Schnider said Monday that Japan's policy mix remains unlikely to generate sustained yen strength, with the currency likely to stay supported more by intervention risk than by domestic monetary fundamentals while the Bank of Japan continues gradual policy normalization and real rates stay negative.
HSBC said that unless the BOJ delivers much faster rate hikes and Tokyo takes a clearer stance on the yen while dialing back its fiscal ambitions, the bank still lacks confidence projecting a downtrend for USD/JPY.
Robin Brooks, a senior fellow at the Peterson Institute for International Economics, said the coordinated action could ultimately weaken rather than strengthen confidence in the yen, since reports that the U.S. Treasury sold euros rather than dollars to buy yen have left investors wondering whether Washington was trying to spare Japan from selling Treasuries to fund the operation.
Sources: Reuters (via Yahoo Finance), CNBC, CNBC
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