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The last time the US and Japan teamed up to intervene in currency markets, Bitcoin was trading under $10. That was 2011. Now, with the yen at its weakest level against the dollar since 1986, both countries appear ready to do it again.
Currency traders are bracing for a joint US-Japan intervention expected to be confirmed on August 3, with the Bank of Japan already purchasing yen during New York trading hours ahead of the formal announcement. US Treasury Secretary Scott Bessent has reportedly outlined a potential intervention size of $5 billion to $10 billion in yen purchases.
What’s actually happening
Japanese Finance Minister Satsuki Katayama has been preparing for joint action with US authorities to stabilize the currency. The US Treasury went a step further on August 1, issuing warnings to primary banks to prepare for yen-buying trades.
The intervention mechanics work like this: both countries’ central banking authorities buy yen on open markets using dollar reserves, artificially boosting demand and pushing the yen’s value higher.
The Bank of Japan has already started purchasing yen during New York trading hours, suggesting the operation is effectively underway before any formal announcement. Monday’s confirmation would simply make the coordination official and potentially expand the scale.
Why the yen matters to crypto
The yen carry trade is one of the most popular strategies in global finance. Traders borrow yen at Japan’s ultra-low interest rates, convert it to dollars or other higher-yielding currencies, and invest the proceeds in risk assets. That includes equities, commodities, and yes, crypto.
When the yen suddenly strengthens because two governments are buying it with $5 billion to $10 billion, those carry trades start losing money. Traders who borrowed cheap yen to buy Bitcoin or Ethereum face a squeeze: the yen they need to repay their loans is now more expensive, forcing them to sell their risk-asset positions to cover the difference.
In July and August 2024, a Bank of Japan rate hike triggered a massive yen carry trade unwind that sent Bitcoin tumbling alongside global equities.
The divergence in monetary policy between the two countries is what created this situation. Japan has maintained an accommodative approach, keeping rates low, while the US has pivoted to higher interest rates.
The scale and stakes
Bessent’s reported intervention range of $5 billion to $10 billion is significant but not unprecedented. Japan spent roughly $60 billion defending the yen in 2022 across multiple interventions. The difference this time is coordination, with the US Treasury actively participating rather than just tolerating Japan’s solo efforts.
For Japan, a collapsing yen means import costs skyrocket, which hammers consumers and businesses that rely on foreign goods, energy, and raw materials.
Speculators who have been shorting the yen are likely already scrambling. The warnings issued to primary banks on August 1 were a signal that the trade is about to get crowded on the other side.
What crypto investors should watch
Watch the USD/JPY pair closely on Monday. If the yen strengthens sharply, the carry trade unwind could accelerate rapidly, as leveraged positions get called and forced selling kicks in.
The Bank of Japan has also indicated possible future rate hikes alongside the intervention. If rate hikes materialize, the carry trade becomes structurally less attractive, meaning a sustained reduction in the speculative capital flowing into risk assets from yen-funded leverage.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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