Japan's Vice Minister of Finance for International Affairs, Atsushi Mimura, stated that Japanese authorities will closely coordinate with the United States as needed to deliver an appropriate response to foreign exchange market fluctuations. On Monday morning, upon arriving at the ministry, Mimura told reporters, "We will continue to respond appropriately to exchange rate movements, cooperating closely with US authorities when necessary, in line with the joint statement from Japanese and US finance ministers last September." Mimura also indicated he had "no intention" to comment on market speculation that officials conducted rate checks last Friday when the yen suddenly appreciated. Previously, Finance Minister Satsuki Katayama stated on Friday that authorities were monitoring currency movements with a sense of urgency.
Last Friday in New York forex trading, the yen climbed higher after experiencing sharp volatility. This followed a press conference by Bank of Japan Governor Kazuo Ueda, after the policy board decided earlier that day to keep benchmark interest rates unchanged. Japanese Prime Minister Sanae Takaichi also expressed views on Sunday, stating Japan would "take all necessary measures against speculative and abnormally rapid fluctuations."
On Monday, the yen advanced as traders began the new week on high alert for potential Japanese intervention in the currency market. The yen appreciated by nearly 1% against the dollar at one point, reaching 154.22; as of this report, the USD/JPY rate stands at 155.01. In 2024, when the yen weakened past 160 against the dollar, Japanese authorities intervened four times by buying yen, deploying a cumulative total of nearly $100 billion. This action established a rough red line, leading market participants to believe the Ministry of Finance might intervene again if the yen weakens beyond that level.
Furthermore, last September, US and Japanese financial officials reaffirmed in a joint statement that their fundamental commitment is to allow markets to determine exchange rates and to avoid intervention aimed at gaining competitive advantage. However, they also left room for maneuver, stating that intervention could be warranted under specific circumstances, consistent with prior statements that it should be limited to countering excessive or disorderly volatility in the forex market. In so-called rate checks, the central bank contacts traders to ask for their USD/JPY quotes. This is a step short of the yen-buying operations sometimes conducted just before actual intervention.
Meanwhile, on Monday, the US dollar weakened against most major currencies as investors debated the possibility of US involvement in Japanese foreign exchange intervention, which could exacerbate a deterioration in sentiment towards the global reserve currency. The Bloomberg Dollar Spot Index fell by as much as 0.3%, extending last week's 1.6% decline. For many dollar watchers, signs of US support for yen appreciation have reignited discussions about potential coordinated currency intervention—aimed at boosting US export competitiveness by weakening the dollar against major trading partners' currencies. This perspective suggests such an agreement would help US exporters compete with rivals like China and Japan.
"The bigger signal is policy coordination," said Daniel Bessà, Senior Vice President at Frontclear. "If the market interprets coordination as a willingness to tolerate a looser global dollar environment, especially under a Fed dovish reaction function, it would reinforce near-term downward pressure on the dollar." Speculation intensified last Friday—traders reported that the Federal Reserve Bank of New York had contacted several financial institutions to inquire about yen exchange rate movements; Wall Street widely believes these inquiries may quietly pave the way for Japan to conduct intervention with US support.
Earlier last year, a research paper by Trump administration economist and current Federal Reserve Governor Stephen Mian on deliberately weakening the dollar sparked analyst discussion about the possibility of a so-called "Mar-a-Lago Accord" (named after Trump's private estate, hinting at a coordination mechanism akin to the 1985 Plaza Accord). The dollar posted its worst weekly performance since May last week, following a period where US policy shifts repeatedly rattled financial markets—Trump first threatened tariffs on Europe to advance a plan to purchase Greenland, then abruptly abandoned it; on Saturday, he threatened 100% tariffs on Canada if it reached a trade deal with China.
Risks to Federal Reserve independence and market expectations that Trump will pressure Powell's successor to cut rates quickly have also continued to weigh on the dollar. The Bloomberg Dollar Index has fallen over 9% since the start of last year. In other markets on Monday, the price of gold surpassed $5,000 per ounce for the first time. Escalating geopolitical risks added momentum to the precious metal's record-breaking rally, further fueling the "currency debasement trade"—where investors exit fiat currencies.
"When the US Treasury starts making calls, it usually signifies this transcends a routine forex event," noted Anthony Doyle, Chief Investment Strategist at Pinnacle Investment Management. "Potential coordinated action would cap USD/JPY upside and make long dollar positions more vulnerable."