Japan to announce joint Tokyo-Washington action on yen

Japanese Finance Minister Satsuki Katayama will reportedly announce today that Tokyo and Washington have taken coordinated action in the currency market to arrest the yen’s slide to a 40-year low.

Katayama is likely to address the two countries’ resolve to combat what they consider a sharp decline in the yen, speaking on the condition of confidentiality due to sensitivity of the issue.

The announcement comes after market sources underlined rounds of yen-buying in the market by Japanese and US authorities intended to boost the Japanese currency from its lowest levels against the dollar since 1986.

According to a market source told Reuters, the Japanese government bought yen for dollars in New York trading hours on Thursday. The Bank of Japan data indicated it sold as much as $58.97 billion to support the yen.

Katayama’s top currency diplomat, Atsushi Mimura told reporters: “Going forward as the official responsible for currency policy, I would like to respond in close coordination with monetary policy.”

Critics have said Japan could encounter restrictions on continued yen-buying intervention as selling down its massive holdings to fund such actions can ultimately lead to a selloff in US debt and prompt a sharp increase in US yields.

On the contrary, some analysts observe the signs of Japan-US cooperation as triggered by Washington's growing concern in recent years which could worsen if Tokyo failed to prevent a selloff in the yen and Japanese and government bonds. Nonetheless, maintaining market trust in Japan’s fiscal sustainability remains crucial.