US Emphasizes Stability of Japanese Yen Amid Joint Market Intervention

August 6, Washington (Raasas/AFP) – US Treasury Secretary Janet Yellen has emphasized that maintaining stability in the Japanese yen is vital not only for Japan and the United States but for the economic balance throughout the entire Asian region.

Yellen warned that a weaker yen could lead to instability in regional currency markets. As a result, the United States and Japan have jointly intervened to support the currency, she made clear.

In an interview with CNBC on Tuesday, Yellen recalled the Asian financial crisis of the late 1990s and noted that a significantly weakened yen could exert pressure on other Asian currencies as well.

According to her, a severely depreciated yen might influence currencies such as the South Korean won, and there is ongoing debate in international markets regarding the valuation of the Chinese renminbi.

Last week, for the first time since 1998, the US and Japan jointly intervened by purchasing yen. Prior to this intervention, the yen weakened to nearly 164 against the US dollar, reaching its lowest point in approximately four decades.

Yellen indicated that given Japan’s economic size, its role in global trade, and its contributions to international savings markets, a stable yen is essential for the global economy.

Washington is reportedly concerned that single-handed intervention could prompt Japan, the largest holder of US Treasury securities, to sell off those bonds, putting pressure on the US debt market.

Analysts link this move to the Trump administration’s policy to reduce the US trade deficit and Japan’s commitment, under a 2025 trade agreement, to invest $550 billion in the US. Even before the joint intervention, Japan had spent tens of billions of dollars attempting independently to support the yen, but the currency continued weakening.

Factors contributing to the yen’s depreciation include interest rate differentials between Japan and the US, elevated international oil prices, and concerns over rising Japanese public debt due to Prime Minister Sanae Takaichi’s expansionary fiscal policies.

Following the joint intervention, officials in Washington and Tokyo signaled readiness to intervene in the markets again if necessary. By Wednesday, the yen had strengthened by about 4 percent from its low point last month.

Yellen emphasized that ultimately, the yen’s exchange rate will be determined more by Japan’s economic and monetary policies than by immediate market interventions. Meanwhile, researchers at Goldman Sachs analyzed that although the joint intervention could have an immediate impact, significant long-term effects would require substantial changes in the global economy and Japan’s domestic policies.

They noted that the US Treasury’s involvement is more aimed at reducing unnecessary volatility in the US debt market than directly controlling the yen’s exchange rate.