The Japanese yen strengthened sharply against the U.S. dollar after coordinated efforts by the United States and Japan to support the currency, marking one of the closest instances of currency coordination between the two countries in decades.
The yen closed at 157.40 per U.S. dollar on Friday, its strongest level since early May, after having traded near its weakest level since 1986 earlier in the week.
According to reports, the recovery was supported by direct purchases of the yen, communication between Japanese officials and currency-trading banks, and discussions between U.S. Treasury Secretary Scott Bessent and Japanese Finance Minister Satsuki Katayama. Bloomberg reported that Mr. Bessent viewed the yen as undervalued, while a Reuters photograph of his meeting notes included a reference to purchasing Japanese yen.
The coordinated action comes as Japan, the largest foreign holder of U.S. Treasury securities, faces pressure to support its currency. Currency intervention typically requires Japan to sell foreign currency assets, including U.S. Treasuries, to purchase yen.
Large-scale sales of U.S. Treasury securities could increase American government borrowing costs by pushing Treasury prices lower and bond yields higher. The development is significant as U.S. Treasury yields have risen in recent months, with the 30-year yield exceeding 5.2%, while a substantial share of U.S. government debt is due for refinancing over the coming year.
Analysts say that supporting the yen may also help limit the need for Japan to sell additional U.S. Treasury holdings, reducing potential pressure on U.S. financial markets while contributing to greater stability in global currency markets.