Is the Japan-U.S. foreign exchange coordination signal strengthening? Japan states that high-frequency communication with the U.S. makes the relationship "closer"

Japanese Finance Minister Satsuki Katayama stated on Tuesday that Japan continues to maintain close dialogue with the United States regarding foreign exchange movements, while markets remain highly alert to the possibility of joint intervention by the two countries to support the yen.

At a routine press conference, Katayama said: “Over the past four months, I have been in close communication with U.S. officials, and our relationship has become even closer during this period.” She added, “Given that both sides have responsibilities to protect their interests, I believe we are both thoroughly fulfilling our duties.”

This statement comes as forex traders remain highly vigilant about potential market interventions. Currency checks are widely seen as preparatory steps for currency intervention. At the end of January, the yen suddenly surged to the mid-155 range, which is generally believed to be the result of a currency check by U.S. authorities, possibly coordinated with Japan.

The Federal Reserve’s January meeting minutes confirmed that the New York Fed conducted a currency check on behalf of the U.S. Treasury. However, data from Japan’s Ministry of Finance later confirmed that the Japanese government did not participate in the yen’s rise in January.

Currency Checks Spark Intervention Speculation

Katayama declined to comment on reports by local media that the currency check conducted last month was led by Treasury Secretary Scott Bessent.

According to Bloomberg, currency checks are widely viewed as preparations for currency intervention, and news that the U.S. and Japan might jointly intervene to support the yen has raised alertness among forex traders. The Fed’s January meeting minutes, released last week, confirmed that the New York Fed conducted a currency check on behalf of the U.S. Treasury.

In late January, the yen suddenly strengthened sharply after approaching the dangerous 160 level, rising to the mid-155 range. The market generally attributed this movement to a currency check by U.S. authorities, possibly coordinated with Japan. However, data later released by Japan’s Ministry of Finance confirmed that the Japanese government did not participate in this yen appreciation.

Yen Still in Dangerous Territory

Markets remain on alert for possible currency intervention, as the USD/JPY exchange rate is still close to 160— a level not seen since July 2024, when the Japanese government intervened by large-scale dollar sales to support the yen. During Tuesday’s trading, the USD/JPY was at 155.08.

SMBC Nikko Securities economist Junichi Makino said that given President Trump’s remarks, which were seen as welcoming a weaker dollar, if the Japanese government decides to buy yen and sell dollars, the U.S. is unlikely to oppose.

Makino stated that if intervention occurs, the yen could rebound to a fair value based on interest rate differentials—estimated around 142 yen per dollar.

Regarding the U.S. Supreme Court’s ruling on Trump’s tariffs, Katayama pledged to continue monitoring further developments and ensure that Japan’s commitments to investments in the U.S. are steadily implemented.

Trump is considering new national security tariffs, after a Supreme Court ruling rendered many of his second-term tariffs invalid.

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