U.S. and Japan Signal Coordinated FX Intervention as Interests Align, Pointing to Relief in Korea–Japan Currency Risks

Won Slides as Talk of Coordinated U.S.–Japan Action Adds Downside Pressure
Korea Could Get Some Relief After Months of Costly FX Defense
Japan’s Takaichi Government Eyes a Poll Boost Ahead of a Snap Election

The won–dollar rate, which had been climbing relentlessly, suddenly swung into a sharp slide. Reports that Washington is pushing for coordinated FX-market intervention with Japan and others to curb the strong dollar quickly piled on downside pressure. The shift is seen as a timely tailwind not only for Korea, which has been burning through cash to defend the currency, but also for Japan’s Sanae Takaichi cabinet, which needs a boost in public sentiment ahead of a snap election.

U.S. FX Intervention Scenario Gains Traction

The won opened sharply lower in Seoul trading on the 26th, extending its drop from the previous session’s close. The move followed growing market speculation that the U.S. and Japanese governments are preparing to intervene to stem yen weakness, a view that quickly intensified downside pressure across Asian currencies. Earlier reports said U.S. and Japanese financial authorities had conducted so-called “rate checks” with commercial banks, a step widely seen as a strong warning that often precedes actual intervention. In New York trading, the yen briefly surged, underscoring heightened volatility.

Adding to the momentum, Reuters on the 25th analyzed the prospects for coordinated U.S.–Japan action and reported that U.S. Treasury Secretary Scott Bessent had also discussed the won with Korea’s top economic official. In unusually blunt remarks, he said the recent slide in the Korean currency did not align with underlying economic fundamentals. Brent Donnelly, founder of Spectra Markets, told Reuters that in light of those comments, it is “not at all unreasonable” to believe the United States and several Asian economies may have agreed to stabilize or strengthen the yen, the won, and the Taiwan dollar.

Speculation around U.S.-led FX intervention is gaining traction because Washington’s interests now align with those of its Asian allies. For the Trump administration, which has vowed to revive U.S. manufacturing, a strong dollar undermines export competitiveness and widens the trade deficit. For countries such as Japan and Korea, surging exchange rates are driving up import costs and intensifying domestic inflation pressure. If multilateral intervention by the U.S. and its Asian partners materializes, it would mark the first such coordinated action since the G7 stepped in after Japan’s 2011 earthquake—then to curb yen strength. This time, the aim would be to rein in dollar dominance by supporting Asian currencies.

Korea Strains to Hold the Line on the FX Rate

For Korea, the shift is a meaningful tailwind after months of costly currency defense. In a breakdown of “market stabilization measures in Q3 2025” released by the Bank of Korea late last year, the authorities’ net FX transactions for July–September (purchases minus sales) came to -$1.745 billion. That was a sharp increase from Q2, when the net total stood at -$797 million, a period when the won–dollar rate was relatively steady in the 1,300s. With the exchange rate jumping into the 1,480s in Q4, the intervention bill likely grew even heavier.

The burden is increasingly being pushed onto commercial banks as well. On the 26th, the Financial Services Commission is set to invite CEOs of major banks to a Korea Federation of Banks board dinner and again ask for cooperation on FX stability. It follows an earlier move in which the regulator separately summoned senior FX executives and urged them to rein in marketing that encourages dollar deposits—effectively another call to mobilize. One banking official said authorities had “called us in three times in the past two months” over FX issues, adding that the pressure has been intense both publicly and behind closed doors.

Major banks have begun rolling out FX-related measures in response. Shinhan Bank will cut rates on its foreign-currency deposit products from 1.5% to 0.1% for dollar deposits, and from 0.75% to 0.02% for euro deposits starting on the 30th. Hana Bank has also lowered the rate on a flagship product from 2.0% to 0.05%, scaled back marketing for foreign-currency deposits, and is reviewing steps to steer customers toward converting back into won. Woori Bank has reduced the dollar rate on a travel-focused foreign-currency deposit product from 1.0% to 0.1%—stripping away incentives to park money in dollars and nudging more dollars into the market.

Japan Heads Toward a Snap Election as Public Sentiment Continues to Sour

For the Takaichi cabinet, defending the currency has become an urgent task as it tries to win back voters ahead of a snap election next month. On the 23rd, Prime Minister Sanae Takaichi formally announced the dissolution of the House of Representatives, the first time since October 9, 2024 under the previous Shigeru Ishiba cabinet—15 months ago. The chamber had sat for 454 days, the third-shortest stretch in Japan’s postwar era. Despite concerns within her party about rushing the dissolution, Takaichi pushed ahead, saying she would stake her political future on securing a majority.

Public reaction, however, was cool. According to Mainichi Shimbun, a regular poll conducted on the 24th–25th put the cabinet’s approval rating at 57%. That was a 10-point drop from the same poll in December and the first time it has fallen into the 50s since Takaichi took office last October. On the early dissolution, 41% said they did not approve, while 27% said they did.

On the decision to dissolve the Diet before deliberations on the FY2026 budget bill, 53% said the government should have prioritized passing the budget over holding an election. While mid-term dissolutions and snap elections are not unusual in Japan, where the prime minister has the power to dissolve the lower house, dissolving the Diet in January—when the budget for the next fiscal year starting in April is typically reviewed—is highly uncommon. In addition, only 27% said it would be desirable for the LDP to win a single-party majority in the lower-house election on the 8th of next month, while 42% said it would not.

For the Takaichi cabinet, easing the risks tied to a weaker yen through FX-market intervention is seen as a key card to play against this negative mood. Takaichi signaled as much on the 25th during a party leaders’ debate, saying the government would take firm action against “speculative” or “highly abnormal” moves in the currency market.