'To Do: Buy Japanese Yen $5-10 Billion'

Bessent's Leaked Memo Confirms Rare U.S.-Japan Joint Intervention to Defend the Yen

A handwritten memo left in plain view at a Cabinet meeting has confirmed what currency markets had been bracing for: the United States and Japan moving together to prop up the battered yen.

On July 31 (local time), U.S. Treasury Secretary Scott Bessent attended a Cabinet meeting chaired by President Donald Trump at Camp David in Maryland. A notepad placed in front of him — photographed by Reuters at 11:33 a.m. ET — read, under an underlined "To Do" heading: "Buy Japanese Yen (JPY) $5-10 bil." The image surfaced hours after Reuters reported that the Treasury had privately notified banks it might intervene in the yen market that same day.

Japan's Ministry of Finance later confirmed the coordinated action, with Finance Minister Satsuki Katayama saying the two countries had worked together to sell dollars and buy yen to calm volatile markets. It marked the first joint intervention between the two governments since 2011, when the G7 acted to weaken the yen following the Great East Japan Earthquake, and reportedly the first joint operation specifically to buy yen since 1998.

Bessent confirmed the move in a statement, saying the coordinated action had countered "disorderly yen movements," and added that Washington would not hesitate to step in again if needed. Trump, for his part, framed the help in personal terms, telling reporters aboard Air Force One that Japan "wanted a little bit of help" and that the U.S. is "always there for Japan" — calling it, above all, a signal of friendship between the allies.

Why the Yen Fell So Far

The yen's slide had been building for weeks. It tumbled to around 164 to the dollar on July 23 — its weakest level since 1986 — before recovering to the 157 range after the Bank of Japan held its policy rate at 1% while Governor Kazuo Ueda left the door open to further hikes. Expectations of closer U.S.-Japan coordination also helped the currency stabilize.

The underlying driver remains the wide interest-rate gap between Japan and its major trading partners. That persistent gap has sustained the "yen carry trade" — investors borrowing cheap yen, converting it to dollars, and investing in higher-yielding assets such as U.S. Treasuries, which keeps adding to selling pressure on the yen. Analysts also point to broader geopolitical instability as a compounding factor.

What Was Really Behind the U.S. Involvement

Washington's willingness to join what is normally a solo Japanese effort has drawn its own round of speculation. Analysts note that a persistently weak yen threatens to widen the U.S. trade deficit by making Japanese goods artificially cheap, and that Japan — the largest foreign holder of U.S. Treasuries — might otherwise have had to sell off its holdings to fund a solo intervention, risking a spike in U.S. Treasury yields. Backing Japan's move was seen as a way to avoid both outcomes at once.

Some observers also read the intervention as consistent with a broader pattern in the Trump administration's approach to trade: officials have repeatedly argued that undervalued currencies among major trading partners — including China, South Korea and Japan — put the U.S. at a disadvantage, and have periodically accused such countries of currency manipulation. In this reading, the yen support doubles as leverage — a way of signaling to Tokyo that Washington will help stabilize the currency in exchange for Japan following through on its pledged investments in the U.S.

The Risk Ahead: An Unwind of the Carry Trade

The yen carry trade depends on two things holding steady: continued yen weakness and Japan's low rates. If the U.S.-Japan coordination succeeds in strengthening the yen, or if the BOJ follows through on further hikes, analysts warn it could trigger an unwind of carry trade positions built up over the low-rate years.

A significant share of that carry trade money is believed to have flowed into South Korea's KOSPI. Should the yen reverse course, foreign investors positioned in Korean equities could move to sell and exit, raising the risk of a sharp pullback in the local market.

Kim Min-ju (Editor-in-Chief)

minjukim900@soongsil.ac.kr