The Japanese yen strengthened broadly against a basket of major and minor currencies during Asian trading on Monday, extending its gains for a fourth consecutive session against the US dollar and climbing to its highest level in three months after a coordinated foreign exchange intervention by Japan and the United States.

Japan's Ministry of Finance confirmed on Monday that it had carried out a coordinated intervention with the United States by buying yen and selling dollars, an extraordinary move aimed at halting the Japanese currency's sharp decline after it had fallen to its weakest level in nearly 40 years.

The ministry added that both countries would not hesitate to conduct further interventions if disorderly movements in the foreign exchange market continue, underscoring their shared commitment to maintaining currency market stability.

The Price

The US dollar fell about 1.5% against the yen to 155.23, its lowest level since May 6, from Friday's closing level of 157.47. During the session, the dollar reached an intraday high of 157.89.

The yen closed Friday up 1.3% against the US dollar, marking its third consecutive daily gain, supported by coordinated intervention by the Bank of Japan and the US Treasury in the foreign exchange market.

As a result of the coordinated intervention, the yen advanced 3.1% against the dollar during July, posting its first monthly gain in three months and its strongest monthly performance since April 2025.

Coordinated Japan-US intervention

Japan's Ministry of Finance said Friday's yen-buying operation, conducted in cooperation with the US Treasury Department, was intended to counter the excessive volatility and disorderly movements that had affected the Japanese currency in recent months.

Japanese Finance Minister Satsuki Katayama told reporters on Monday: "We will not hesitate to carry out further coordinated interventions."

Japan's top currency diplomat, Atsushi Mimura, said the joint intervention with the United States represents an unprecedented level of cooperation between the two countries to support stability in the foreign exchange market.

He added that the government will continue coordinating its currency policy with the Bank of Japan's monetary policy to ensure decisive action whenever necessary to limit excessive yen weakness and preserve financial market stability.

US Treasury Secretary Scott Bessent also confirmed the coordinated action in a statement, saying Friday's intervention had helped reduce disorderly volatility in the yen.

US President Donald Trump said on Sunday that the United States is helping Japan support the yen as a sign of friendship and to promote global economic stability.

Bank of Japan

Bank of Japan data suggested that Tokyo likely carried out a massive foreign exchange intervention on Thursday, purchasing yen and selling an estimated $59 billion worth of dollars, equivalent to about 8.5 trillion, making it one of the largest currency support operations in Japan's history.

The exceptional scale of the intervention reflects Japanese authorities' determination, backed by close coordination with the United States, to halt the yen's sharp decline and curb speculative pressures that had pushed the currency to its weakest level in four decades.

Market views

Naomi Muguruma, Chief Bond Strategist at Mitsubishi UFJ Morgan Stanley Securities, said comments from Japan's top currency diplomat Atsushi Mimura and US Treasury Secretary Scott Bessent strengthen the position of the more hawkish members within the Bank of Japan and reinforce expectations of further monetary policy tightening.

Muguruma added that she believes a September interest rate increase is now almost certain, arguing that waiting until October would risk triggering another wave of yen weakness and undermine the authorities' recent efforts to support the currency.

Japanese interest rates

Following the intervention and the latest policy signals, markets now price in more than a 90% probability that the Bank of Japan will raise interest rates by 25 basis points at its September meeting.

Investors will continue monitoring upcoming Japanese inflation, unemployment, and wage data for further clues on the outlook for monetary policy.