Treasuries, Not Friendship: Ex-BOJ Official on the US-Japan Yen Intervention

Inside the First US-Japan Yen Intervention in 30 Years

Last week's coordinated intervention by Washington and Tokyo to prop up the yen — the first joint operation of its kind in nearly three decades — was not the act of friendship that President Donald Trump described, according to Sayuri Shirai, a former member of the Bank of Japan's monetary policy board. In an interview with L'Express, Shirai argues that the United States acted primarily to protect its own interests, above all the market for US Treasuries and the stability of the global financial order.

The yen had fallen to a multi-decade low against the dollar, squeezed by a wide gap between interest rates: the BOJ's policy rate stands at 1%, while US rates are in the 3.5%-3.75% range. What made the intervention unusual, Shirai says, is that it unfolded during a BOJ policy meeting, and that authorities reportedly sold euros to buy yen — a sign of a carefully prepared, coordinated operation involving Japan's finance ministry, the BOJ and the US Treasury.

In Shirai's view, the move will probably hold the yen near current levels for a while, because a coordinated signal has more weight than a unilateral one. But markets will quickly test whether officials are prepared to intervene again, and repeated operations risk sending a bad signal to the international monetary order, especially as other currencies are also depreciating. That leaves the BOJ as the decisive actor: Shirai expects growing pressure for a rate hike at or after the September meeting, possibly taking the policy rate from 1% to 1.25% and later to 1.5%.

Shirai's Read: Treasuries, Coordination and the Limits of FX Action

Why Washington Acted: The Treasury Market at the Center

Shirai rejects the idea that the US joined the intervention to help Japan. The first concern, she says, is the American bond market. If yen weakness spiraled out of control, the Japanese finance ministry could be forced into massive intervention, which would mean selling US Treasuries to finance it. Washington's principal worry is anything that could destabilize the Treasury market — the foundation of the global financial system.

She points to January as a recent precedent: after Prime Minister Sanae Takaichi's budget announcements, JGB yields spiked and contagion spilled into Treasuries, drawing immediate displeasure from US authorities. The US Treasury's July semiannual FX report had already flagged the yen's undervaluation, laying the groundwork for this operation. The second risk is broader: the yen remains a major currency and, by many measures, the cheapest in Asia, so a persistent slide amid global financial uncertainty could disturb the world economic order. These are analytical judgments from the interview, not official US statements.

A Planned Signal, Not a Repeatable Tool

The operation's unusual timing — during a BOJ policy meeting — and the reported use of euros to buy yen point to a thoroughly planned, coordinated effort, in Shirai's assessment. The BOJ governor's heavy focus on exchange-rate moves, in contrast with the June meeting, suggests the central bank was informed in advance. The US participation is the genuinely unprecedented part.

The intervention's main purpose, she argues, was to send a message that authorities are ready to act. It may be more durable than a unilateral intervention, but it cannot be repeated often. Other currencies are also depreciating, and repeated US-led operations would cast doubt on the international monetary order. Shirai's verdict: intervention buys time; it does not fix the underlying problem.

The BOJ's Narrow Path: From 1% Toward a 1.5% Ceiling

The real solution, Shirai says, is higher BOJ rates. The central bank wants to prevent further yen depreciation and to rebuild policy room, but it faces a fragile economy: aging demographics, limited productivity gains and potential growth of roughly 0.6%. About 70% of Japanese housing loans carry variable rates indexed to the BOJ's policy rate, so even a 25-basis-point increase would hit borrowers directly.

Shirai projects a move from 1% to 1.25%, and probably to 1.5% next year — in her view, the ceiling. With US rates at 3.5%-3.75% and inflation there more persistent, the interest-rate gap will remain wide, making durable yen stabilization hard. Expect pressure to build ahead of the September BOJ meeting; Treasury Secretary Scott Bessent has long urged normalization, and in May linked his expectations to the BOJ's independence — a comment Shirai reads as acknowledgment of the divergent views inside Japan.

Takaichi's Fiscal Dilemma Leaves a Key Risk Open

Prime Minister Takaichi last week cut the consumption tax on food from 8% to 1% and floated 'crisis management' investments, without specifying how any of it will be financed. She wants to avoid new JGB issuance, because a bond-funded expansion would push up rates and increase interest costs on Japan's public debt. That leaves her fiscal strategy unresolved until autumn, when she must clarify funding. In Shirai's view, officials are still postponing hard decisions, and the BOJ's ability to stabilize the yen will depend on whether fiscal policy moves in the same direction.

What to Watch in the Yen, BOJ Rates and Tokyo's Autumn Budget

The coordinated intervention shifts the immediate risk calculus for anyone holding yen exposure, Japanese rates, or Treasury positions. The key dates and thresholds to watch:

• FX and fixed-income traders: expect the yen to hold near current levels for now, but treat the support as a signal rather than a policy fix. The next test is whether officials act again — a repeat US-joined operation would likely be read as a sign of stress in the international monetary order.
• BOJ watchers: focus on the September policy meeting. Shirai judges a rate hike 'very probable' then or somewhat later, with a path of 1% to 1.25% and possibly 1.5% next year as the ceiling.
• Japanese borrowers: with roughly 70% of housing loans on variable rates indexed to the BOJ's policy rate, prepare for a 25-basis-point move to feed directly into mortgage costs.
• Treasury and JGB investors: watch Tokyo's autumn budget clarification. If tax cuts and 'crisis management' spending lack credible financing, JGB yields could spike — the January episode showed how quickly that spills into US Treasuries.