US and Japan Conduct First Joint Currency Intervention Since 1998

U.S. Treasury Secretary Scott Bessent coordinated a joint currency intervention with Japan on July 31, 2026, to support the yen after it hit a 40-year low. This marked the first coordinated effort between the two nations since 1998. To avoid spiking U.S. borrowing costs, the Treasury sold euros from the Exchange Stabilization Fund to purchase between $5 billion and $10 billion of yen. The move initially strengthened the yen from 164 to 155 per dollar, though it later retraced to approximately 159.30.

The intervention aimed to prevent Japan, the largest foreign holder of U.S. debt with $1.14 trillion in securities, from selling those assets to fund its own currency support, which would have driven up U.S. bond yields. To provide further stability, Bessent requested that the Federal Reserve expand its Foreign and International Monetary Authorities Repo Facility to lend Japan more dollars. This has raised concerns regarding the independence of Federal Reserve Chairman Kevin Warsh and prompted Senator Elizabeth Warren to demand a legal justification for the use of taxpayer-linked funds.

Diplomatic and economic tensions persist despite the operation. The European Central Bank was reportedly blindsided by the U.S. sale of euro reserves. Additionally, Bessent has clashed with Japanese Prime Minister Sanae Takaichi over monetary policy; Bessent argued the Bank of Japan is behind the curve on inflation, while Takaichi has historically resisted rapid interest rate hikes to protect economic growth.