Japanese media reported that the United States' rare joint intervention with Japan in the foreign exchange market to buy yen on July 31 (local time) was due to a positive evaluation of Bank of Japan Governor Kazuo Ueda's remarks hinting at an early rate hike.

On August 11, Kyodo News and the Mainichi Shimbun cited multiple Japanese government officials reporting that the U.S. evaluated Governor Ueda's remarks last month as "hawkish" and stepped in for a joint intervention.

During a press conference following the Bank of Japan's Monetary Policy Meeting on July 31, Governor Ueda stated that the trend inflation rate "risks rising beyond the 2% price stability target," adding that "if necessary, we will accelerate the pace of rate hikes."

The U.S. side reportedly interpreted this statement as a strong signal for a rate hike in September and kept pace with Japan in intervening in the foreign exchange market to curb the depreciation of the yen.

A high-ranking Japanese government official stated, "The U.S. side highly praised Governor Ueda's remarks," adding, "The Bank of Japan has been left with no choice but to opt for a rate hike (at the September Monetary Policy Meeting)."

Excessive depreciation of the yen raises import prices and risks leading to inflation, prompting the Japanese government and the Bank of Japan to seek ways to correct it.

However, as solo interventions have limitations, it is reported that Japan covertly requested a joint intervention from the U.S.

The interests of both countries reportedly aligned in that a weak yen and a strong dollar could undermine the competitiveness of U.S. export industries.

Additionally, analysts suggest that concerns were reflected that an increase in Japan's long-term government bond yields could lead to a concurrent rise in U.S. Treasury yields, which in turn could lead to a cooling of the U.S. economy.

In particular, for the U.S. Donald Trump administration heading into the midterm elections this fall, there is also believed to have been an intent to avoid voter dissatisfaction caused by an economic slowdown or high interest rates.

U.S. Treasury Secretary Scott Bessent recently made remarks in an interview with the Nikkei that seemed to urge Japan to move away from its low-interest-rate policy.

While not directly demanding a rate hike, he stated, "I have known BOJ Governor Kazuo Ueda for 15 years," and added, "He has exceptional market sense and I trust him deeply."

This was interpreted as an indirect expression of anticipation for a rate hike by the Bank of Japan.

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