JPMorgan Says US Scope for Joint Yen Intervention Is Limited, but Could Reach $187 Billion

The US has limited room to continue joint foreign-exchange intervention with Japan, though it could expand its available firepower to as much as $187 billion if needed.

Bloomberg reported on August 2 that JPMorgan, in a report, said the US Treasury’s Exchange Stabilization Fund held about $13 billion of euro-denominated assets and $25.5 billion of dollar assets as of June.

That is less than the $35 billion to $60 billion Japan spent on yen-buying intervention from 2022 through 2026.

JPMorgan wrote that the Treasury could raise its intervention capacity to as much as $187 billion by using International Monetary Fund special drawing rights, or SDRs, and converting foreign-currency assets into dollars. If the Federal Reserve also joined the intervention, the amount could effectively double.

Still, US intervention capacity is not unlimited. JPMorgan said the Exchange Stabilization Fund has finite resources, meaning additional funding would probably require congressional budget approval.

The report also noted that past US foreign-exchange interventions were mostly limited to $1 billion to $2.5 billion.

JPMorgan also cited the joint yen-buying intervention by the US and Japan in June 1998. The operation was carried out only once, and the dollar-yen exchange rate returned to its pre-intervention level within a few weeks. The two countries did not conduct further joint intervention afterward, suggesting limited willingness to stay in the market for an extended period.

JPMorgan said the chances of the dollar-yen exchange rate rising above 164 have diminished because the US government has taken a more proactive stance than expected. Still, a sharp yen rally pushing the rate below 150 is unlikely on joint intervention alone, as neither country is seeking to aggressively drive yen strength.