On July 31, for the first time since 1998, the U.S. Treasury intervened to buy yen, alongside Tokyo and, according to market sources, Seoul.
While academic debate sought to bury the question of exchange rates, practice has brought it back to the heart of international politics. Thus last week saw the most significant coordinated currency operation since the post-Fukushima intervention of 2011, as well as the first joint yen purchases by Washington and Tokyo since June 1998.
Let us recall the facts first, in three sequences.
- Thursday, July 30: with the yen at its weakest since 1986 (163 to the dollar), the Japanese Ministry of Finance triggers the largest single-session intervention in Tokyo’s history, in the range of 53 to 59 billion dollars according to estimates. On the same day, according to market sources in Seoul, the Bank of Korea also intervenes, as the won has faced downward pressure for months. Following these coordinated interventions it reaches a nine-month high.
- Friday, July 31: according to a revelation from the Financial Times, the New York Fed buys yen on behalf of the Treasury, not against dollars but against euros. The amount, unofficial, would correspond to the handwritten note by Scott Bessent photographed at Camp David: “Buy Japanese Yen (JPY) $5-10 bil.”
- Monday, August 3: official confirmations, which is already an extremely rare event. Finance Minister Satsuki Katayama asserts the action was “in coordination with the Treasury Department” and announces the future use of the Fed’s FIMA repo facility. Bessent promises to “not hesitate to participate in new joint interventions” to “correct the substantial undervaluation of the yen.” Trump provided the political key to this operation: it is a “signal of friendship… They wanted some help, and we are always there for Japan,” before adding the next day on Fox News: “Japan has always been very good to us, with the exception, of course, of Pearl Harbor.”
The choice of instruments reveals the core of the doctrine: discretionary monetary protection, anchored to the 2025 trade agreements and calibrated to cost nothing to either the dollar or the Treasury market.
- First, by selling euros rather than dollars, Washington supports the yen without weakening its own currency. Europe, absent from the table, absorbs the appreciation in a move that HSBC analysts described as “highly unusual, maybe unprecedented.” It is extremely rare to intervene with the euro without involving the ECB, which has so far refused to comment.
- The rule is not written anywhere, but it has structured for decades the practices among central banks: by breaking from it, Washington treats the European currency as a mere reserve instrument and delivers to Europeans a signal of contempt.
- Next, the FIMA facility, which Bessent wants to “increase in the coming months,” allows allied central banks to borrow dollars by pledging their Treasuries (up to $60 billion per counterparty) without selling them.
- No one in Washington wants Tokyo ($1.14 trillion in U.S. securities) to finance the defense of the yen by weighing on an already jittery bond market. If the protection is real, its cost to America is zero.
- Nine months after the peso bailout, explicitly conditioned on Javier Milei’s victory, Washington deploys the same instrument a second time.
To understand this move, one must read it in sequence with the Argentine peso rescue, Pakistan’s new request for a swap line, or the United Arab Emirates’ request for a swap line, which the U.S. authorities have not yet answered.
- In October 2025, the Treasury finalizes a $20 billion swap line with the Argentine central bank and directly purchases pesos via the Exchange Stabilization Fund, a quintessential discretionary instrument, whose decisions are by law “final and non-appealable.”
- The conditionality is publicly stated by Trump: “If he loses, we will not be generous with Argentina.” Milei wins. Argentina repays in January with “dozens of millions of profit for the taxpayer,” according to Bessent, and the line remains open.
It remains to understand why an administration obsessed with defining an asymmetric framework with its allies, including the most faithful, directly intervenes on the monetary level and why it is ready to risk its credibility and that of the dollar in high‑risk interventions/operations.
- The support for the yen and the won cannot be read apart from the 2025 asymmetric trade agreements: the investment commitments at their core are denominated in dollars but financed by economies whose currencies were depreciating. Therefore, letting the yen and the won slip would, for Washington, render its own “tributaries” insolvent.
- The scale of the commitments measures what is at stake. On the Japanese side, $550 billion in investments in the United States by 2029, with projects selected by a committee chaired by Commerce Secretary Howard Lutnick, and profit splits of up to 90/10 in favor of the United States, with an explicit threat to revert to tariffs in case of default. On the Korean side, $350 billion, with cash payments capped at $20 billion per year, a guardrail secured by Seoul precisely to cushion the won, its request for a permanent dollar-won swap having been refused.
- The link between monetary protection and payment deadlines is not a mere inference: as early as January, Seoul’s analysts explicitly tie Bessent’s verbal pressure on the won to the timing of the agreement (jawboning).
- The mechanism thus applies Miran’s doctrine to the letter: making allies bear the cost of adjusting the dollar, in exchange for American protection.
It is therefore not a return to international monetary coordination on the model of the Plaza Accords, but a purely unilateral gesture that bypasses the appropriate multilateral formats, such as the G7 or the G20, or cooperation among central banks. This episode shows that the Trump administration is building a competing, hegemonic, bilateral and conditional model.
- The strength of the arrangement lies in the coercion taking the form of a demand: Tokyo wanted intervention, Seoul wanted a swap line, as did Buenos Aires. Each protegé can thus present subordination as a domestic victory.
- Nevertheless all parameters (eligible currencies, timeline, counterparty, withdrawal right) remain at Washington’s discretion.
The question this sequence raises for Europe is not technical: in a system where monetary protection is exchanged for alignment, what is the value of a currency that has neither protector nor doctrine to protect itself?