History of Japan's intervention in currency markets

July 31, 2026 - 07:42

TOKYO - The yen surged sharply against the dollar late Thursday after market sources pointed to official yen buying in New York trading hours, with South Korea reportedly coordinating its own intervention at the same time. This move is just the latest chapter in Japan's long and often controversial history of trying to manage its currency.

Japan has a deep record of stepping into foreign exchange markets, dating back decades. The most active period was in the early 2000s, when the Ministry of Finance sold yen aggressively to weaken it and support exporters. That campaign, which ran from early 2003 through March 2004, saw Japan spend roughly 35 trillion yen, a record for any single intervention effort. The goal then was to fight deflation and keep the economy competitive.

Since then, Tokyo has intervened far less often, mostly only when moves were seen as excessive or disorderly. In 2011, after a massive earthquake and tsunami, Japan acted alone to sell yen to stem a rapid spike that threatened the recovery. In 2022, authorities bought yen to defend it, marking the first such move in over two decades. That was followed by another round in late 2023.

The strategy has always been the same: wait for a clear, one-sided move, then hit the market with size. But success is never guaranteed. Interventions often provide only temporary relief, and the long-term trend is usually set by interest rate gaps and broader economic forces. Japan's massive foreign reserves, while helpful, are not unlimited, and repeated action can lose its shock value.

Thursday's coordinated effort with South Korea is notable because it signals a rare moment of regional cooperation in currency policy. Both countries have faced persistent pressure on their currencies this year, driven largely by a strong dollar. Whether this joint move will hold remains to be seen, but it shows that Tokyo is still willing to act when it feels the market has gone too far.