--- title: "US and Japan Join Forces to Support the Yen: Is Washington's True Motive to Prevent Japan from Selling US Treasuries?" type: "News" locale: "en" url: "https://longbridge.com/en/news/294648908.md" description: "The rare joint intervention by the US and Japan in the foreign exchange market, ostensibly to defend the yen, is in reality Washington's \"battle to protect US Treasuries.\" To prevent Japan, its largest overseas creditor, from selling US Treasuries to raise funds—thereby impacting long-end yields—the US was compelled to step in. Both sides prominently leveraged the FIMA facility to avoid selling pressure, but this short-term drastic measure is unlikely to cure the fundamental structural weakness of the yen" datetime: "2026-08-03T06:22:30.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/294648908.md) - [en](https://longbridge.com/en/news/294648908.md) - [zh-HK](https://longbridge.com/zh-HK/news/294648908.md) --- # US and Japan Join Forces to Support the Yen: Is Washington's True Motive to Prevent Japan from Selling US Treasuries? Decades after their last coordinated action, the US and Japan have once again joined hands to intervene in the foreign exchange market. While superficially aimed at stabilizing the yen, the move reflects Washington's deep-seated concerns about the stability of the US Treasury market. **Analysts point out that the core logic behind US participation in this coordinated intervention is to prevent Japan from being forced to sell large amounts of US Treasuries to raise intervention funds—a scenario that could inflict an unbearable shock on long-end US Treasury yields.** This joint US-Japan intervention marks the first time since 1998 that the two countries have bought yen together, and it is the first G7-level joint action since the Great East Japan Earthquake in 2011. The yen had previously fallen to near forty-year lows, touching 163.73 per US dollar last Thursday. Following news of the intervention, the yen quickly rebounded to 157.57. Trump stated that US participation in the intervention was a show of support for Japan and a measure to maintain global economic stability. The market reacted sensitively. Several analysts warned that if Japan were forced to intervene unilaterally and had to sell US Treasuries to finance it, the long end of the US Treasury yield curve would face additional pressure—US 10-Year Treasury Yield has already risen by nearly 57 basis points this year. The high-profile emphasis by the US and Japanese finance ministries on the Federal Reserve's FIMA repo facility was interpreted as a significant signal that both sides are striving to avoid the worst-case scenario of "forced selling of US Treasuries." ## Preventing a Sell-off in US Treasuries: Washington's Core Concern Analysts believe that the key driver behind the US's rare move is that Japan is the largest foreign holder of US Treasuries. If the Japanese Ministry of Finance intervenes unilaterally to buy yen, **the required US dollar funds typically come from selling US Treasuries held in foreign exchange reserves. Louise Loo, Head of Asian Economics at Oxford Economics, stated that this is "possibly" one of the core reasons for US participation. "There is an element of self-protection here. If Japan takes potentially aggressive fiscal policy actions that trigger market turmoil, it could spill over into the US Treasury market, thereby destabilizing the US dollar."** Masahiko Loo, Senior Macro Strategist at State Street Bank, further pointed out that **the Japanese Ministry of Finance's announcement of plans to use the FIMA repo facility for future interventions is a signal that "may be more significant than the intervention itself." He explained that the FIMA facility allows foreign central banks to obtain US dollar liquidity without directly selling US Treasuries, effectively sending a clear signal to the market that Japan does not need to use US Treasuries to raise intervention funds.** "Highlighting the availability of the FIMA repo facility shows the market that Japan can obtain US dollar liquidity without selling US Treasuries... eliminating concerns that MOF intervention could put pressure on US funding markets through the sale of short-term US Treasuries," he said. "This is an attempt to maximize the signaling effect within the existing toolkit framework." ## Spillover Effects: Linkage Risks Between the Japanese Bond Market and Global Bond Markets Washington's concerns extend beyond the yen itself to broader linkage risks in the bond market. Masahiko Loo pointed out that **continued yen weakness could trigger further selling of Japanese Government Bonds (JGBs), pushing up JGB yields, and spreading to global bond markets against the backdrop of rising long-term borrowing costs in both the US and Japan.** Louise Loo added that if Washington believes Japan's fiscal policies are pushing up JGB yields and depressing the yen, coordinated intervention can buy time for the Bank of Japan to resume rate hikes later this year. She emphasized that a fundamental strengthening of the yen requires tighter monetary policy, not repeated market interventions. Vishnu Varathan, Head of Macro Research for Asia (ex-Japan) at Mizuho Securities, stated that US participation "multiplies" the effectiveness of this intervention. The involvement of the US Treasury and the Federal Reserve gives the market more reason to believe that authorities are prepared to act again if necessary. Both governments simultaneously warned that they would "not hesitate" to act again, further strengthening the deterrent against speculative short-selling of the yen. ## Skepticism: Doubts Over Intervention Effectiveness and Confusion Over Technical Operations Despite positive interpretations of the policy intent behind this intervention, analysts remain reserved about its actual effectiveness. Confusing the market, reports indicated that the US sold euros rather than US dollars to buy yen this time, deviating from the usual convention of financing coordinated interventions with US dollar assets. Robin Brooks, a Senior Fellow at the Brookings Institution, strongly questioned this move, calling it "confusing to the market and ultimately counterproductive." He stated, "While it may superficially give the impression that the intervention is more forceful than before, US involvement raises more questions than answers, especially given the very strange operation of the US selling euros to buy yen." On deeper structural issues, Brooks clearly pointed out that intervention cannot reverse the yen's depreciation trend driven by the Japanese bond market. He believes that although the Bank of Japan officially terminated yield curve control in March 2024, it continues to purchase large amounts of Japanese Government Bonds, effectively keeping borrowing costs below the level that a free market would determine. In this context, the yen still faces downward pressure. Masahiko Loo also acknowledged the limitations of intervention: "Intervention may influence trends in the coming months, but the Bank of Japan's monetary policy normalization process and hedging fund flows are the true variables determining trends in the coming years." Analysts warn that unless Japan addresses the structural factors driving the yen's weakness, this coordinated action may not be any more lasting than previous interventions. ### Related Stocks - [YCS.US](https://longbridge.com/en/quote/YCS.US.md) - [IEF.US](https://longbridge.com/en/quote/IEF.US.md) - [SHV.US](https://longbridge.com/en/quote/SHV.US.md) - [BIL.US](https://longbridge.com/en/quote/BIL.US.md) - [YCL.US](https://longbridge.com/en/quote/YCL.US.md) - [FXY.US](https://longbridge.com/en/quote/FXY.US.md) - [TLT.US](https://longbridge.com/en/quote/TLT.US.md) - [GOVT.US](https://longbridge.com/en/quote/GOVT.US.md) - [UBT.US](https://longbridge.com/en/quote/UBT.US.md) - [TMF.US](https://longbridge.com/en/quote/TMF.US.md) - [TBT.US](https://longbridge.com/en/quote/TBT.US.md) - [TMV.US](https://longbridge.com/en/quote/TMV.US.md) - [TBF.US](https://longbridge.com/en/quote/TBF.US.md) - [TLTW.US](https://longbridge.com/en/quote/TLTW.US.md) - [TSYW.US](https://longbridge.com/en/quote/TSYW.US.md) - [STT.US](https://longbridge.com/en/quote/STT.US.md) - [MFG.US](https://longbridge.com/en/quote/MFG.US.md) - [8411.JP](https://longbridge.com/en/quote/8411.JP.md) - [SPIN.US](https://longbridge.com/en/quote/SPIN.US.md) ## Related News & Research - [FOREX-Yen clings to intervention gains as traders stay alert to more](https://longbridge.com/en/news/294771489.md) - [BoJ holds policy rate at 1.0% peak, tweaks economic growth and price outlook](https://longbridge.com/en/news/294460571.md) - [Japan to vow coordination with US on weak yen in historic battle](https://longbridge.com/en/news/294615001.md) - [Yen extends decline, bond futures gain after BOJ holds rates steady](https://longbridge.com/en/news/294452857.md) - [Yen briefly jumps in jittery markets](https://longbridge.com/en/news/294345958.md)