US-Japan Joint FX Intervention in 15 Years: Impact on Global Stock Markets

Will the Super Weak Yen Reverse? US and Japan Intervene Jointly After 15 Years

To defend against the record-breaking depreciation of the Japanese Yen, US and Japanese authorities have executed a joint intervention in the foreign exchange market for the first time in 15 years. The Yen, which had soared to the 163-yen range against the dollar—its lowest level in 40 years since 1986—sharply rebounded to the 157-yen range immediately following the coordinated action. This move, marking the first coordinated dollar-selling and yen-buying intervention in 28 years, sends a powerful warning to the market.

$44 Billion Injected and Rate Checks: Strong Will to Defend the Currency

Japanese authorities are estimated to have injected up to 7 trillion Yen (approximately 44 billion USD) into this intervention. Notably, the US Treasury Department took substantial action by selling euros and buying yen directly through the Federal Reserve Bank of New York. Furthermore, the US conducted a 'Rate Check' with major commercial banks prior to the intervention, sending an advance warning to speculative forces. This is interpreted as the materialization of the US government's strong commitment to economic cooperation.

Concerns Over Yen Carry Trade Unwinding and Impact on Domestic Markets

With the short-term appreciation of the Yen, concerns are mounting in global financial markets over the unwinding of the 'Yen Carry Trade' (a strategy of borrowing low-interest yen to invest in high-yield assets). Amidst expanding market volatility in the second half of 2026, a sudden outflow of capital could exert downward pressure on emerging Asian markets as a whole. Conversely, since the Korean Won tends to synchronize with the Yen, there is also the possibility of short-term inflows of foreign capital due to a stronger Won.

Frequently Asked Questions (FAQ)

• Q. Why did the US help Japan's FX intervention now?
  A. It stems from the judgment that the extreme weakness of the Yen could negatively impact not only the Japanese economy but also the US trade balance. It also includes the strategic purpose of showcasing the solid economic alliance between the two countries.
• Q. Will the Yen exchange rate continue to fall due to this measure?
  A. While the short-term exchange rate drop (Yen appreciation) is clear, Wall Street experts generally agree that without a narrowing of the fundamental interest rate gap between the US and Japan, a long-term trend reversal will be limited.
• Q. How should domestic stock investors respond?
  A. Investors should prepare for global market volatility caused by the outflow of yen carry funds. In the short term, it is necessary to closely monitor changes in earnings forecasts for export-driven companies, as well as foreign supply and demand trends.