US Treasury tells banks it may intervene in yen market Friday

The US Treasury has told a number of banks, through the Federal Reserve Bank of New York, that it may enter the yen market on Friday and that they should <"stand ready for future action," according to Reuters, citing a source familiar with the matter.

Tokyo's Blitz Sets the Stage

The warning follows a large yen-buying operation by Japan on Thursday. The yen jumped suddenly against the dollar after what market sources described as official yen buying during New York trading hours, coordinated with intervention by South Korea, lifting the currency from near four-decade lows and delivering its biggest one-day gain against the dollar in almost two years. The move followed a $70 billion intervention in April and May. BOJ data suggests Thursday's operation alone ran close to $59 billion.

Treasury Secretary Scott Bessent had already set out the administration's position, saying the yen "seems very undervalued to me" and that excessive volatility was unhealthy. The Treasury's foreign-exchange report separately concluded that the yen had undergone "substantial" undervaluation after falling 51% against the dollar between the end of 2011 and April 2026. After Thursday's intervention, the yen traded around 159.61 per dollar, having reached approximately 163.94 earlier in the week, its weakest level in four decades.

A Historically Rare Move

Direct US participation in currency market intervention is extremely rare. The last comparable episode was in March 2011, when the G7 launched its first coordinated currency market intervention since 2000 to rein in a soaring yen. That action was triggered by a surge in the yen to record levels following Japan's earthquake and tsunami, with the United States, Britain, Canada, and the European Central Bank joining Japan in a concerted intervention.

Washington also purchased $833 million worth of yen in June 1998 to strengthen the Japanese currency, though the limited size of that transaction compared with Japan's own interventions shows why US involvement can matter primarily as a policy signal rather than through purchasing power alone.

If the US were to act alongside Japan this time, the most likely immediate effect would be a stronger yen and a weaker dollar, with traders facing the risk of repeated purchases rather than a single Japanese operation that could be reversed once authorities left the market.

Sources:
Reuters via Yahoo Finance: US Treasury informed banks it may intervene in yen
The Deep Dive: Why the US warned banks about possible yen intervention
Reuters via Yahoo Finance: History of Japan's intervention in currency markets