The governments of Japan and the United States are known to have simultaneously stepped into the foreign exchange market to curb the weak yen.

Citing market sources, the Nikkei reported today (the 31st) that the drastic plunge in the dollar-yen exchange rate in the New York foreign exchange market the previous day—which pushed the yen's value up and temporarily drove the rate down to the 157.80 yen range per dollar during trading—was driven by the Japanese government and the Bank of Japan intervening by buying yen and selling dollars.

The Nikkei also reported, citing market insiders, that U.S. monetary authorities conducted a "rate check," which serves as a preliminary step to market intervention.

A rate check involves authorities inquiring with major banks about foreign exchange trading conditions prior to stepping into the market. It was previously reported that a rate check on the yen by U.S. authorities was led by U.S. Treasury Secretary Scott Bessent in January of this year.

Starting around 10:30 PM on the 30th Japan time, the yen-dollar exchange rate, which had been hovering around the 162.80 yen level, began to plummet, dropping by more than 2% in about 50 minutes and triggering a sudden surge in the yen's value.

Subsequently, in the New York foreign exchange market, the yen-dollar rate rebounded to the 159.54 yen level as of 6:00 AM on the 31st, and in the Tokyo market, it was trading around the 160.55 yen level as of 10:00 AM, up 3.20 yen from the previous day.

The Nikkei noted that the Federal Reserve Bank of New York requested rate checks from multiple banks under the instruction of the U.S. Department of Treasury, describing the simultaneous market involvement by U.S. and Japanese authorities as unusual.

The analysis added that the financial authorities of the U.S. and Japan appear to have targeted a timing that would maximize the impact of foreign exchange market intervention, at a time when the U.S. central bank, the Federal Reserve (Fed), is keeping benchmark interest rates steady, contributing to a weaker U.S. dollar.

When asked whether they intervened in the foreign exchange market, Japanese Finance Minister Satsuki Katayama avoided giving a direct answer, stating, "We are always responding with a sense of tension."

According to NHK, Atsushi Mimura, Japan's Vice Minister of Finance for International Affairs and top currency diplomat, also declined to answer whether currency actions were coordinated with U.S. authorities.

However, some interpretations suggest he hinted at a tacit agreement with U.S. financial authorities by remarking, "We recognize that we are receiving support that goes beyond moral support from the U.S. authorities. We are in constant communication."

According to Japanese media citing a post on the X (formerly Twitter) account of Fox Business Network, Treasury Secretary Bessent made remarks defending the value of the yen during an interview.

When asked about the Japanese authorities' foreign exchange market intervention, he reportedly said, "We believe that excessive volatility in the yen exchange rate is unhealthy. The yen appears to be significantly undervalued, and at some point, the market will realize this."

(Photo: Yonhap News)