Japan and U.S. Join Hands to Support the Yen: ETFs to Benefit

Japan and the U.S. step in to support the yen. See which ETFs could benefit from a stronger yen -- and which export-focused funds may face pressure.

Sanghamitra Saha

3 min read

Japan and the United States have confirmed that they jointly intervened in currency markets last week to halt the yen's sharp decline after it sank to a fresh 40-year low. The coordinated intervention was the first U.S.-Japan joint operation to buy yen since 1998, and the first coordinated intervention involving the two countries since the G7 acted to weaken the yen after the 2011 earthquake, as quoted on CNBC.

More Coordinated Interventions Possible

Japan's Ministry of Finance and U.S. Treasury Secretary Scott Bessent said they are prepared to intervene again if needed. The move underscored both countries' determination to prevent excessive volatility in the yen and Japanese government bond markets from spilling over into the broader global financial system, including the potential impact on U.S. borrowing costs, per BBC News, as quoted on Yahoo Finance.

Industry experts told CNBC that one of Washington's main concerns was preventing Japan from having to sell large amounts of U.S. Treasuries to fund unilateral currency intervention, given that Japan is the largest foreign holder of U.S. government debt.

The CNBC article went on to explain that continued weakness in the yen could trigger further selling in Japanese government bonds, with rising yields potentially spilling over into global bond markets.

How Today's Situation Differs from 2011

Today's intervention is the opposite of the one in 2011. Back then, authorities intervened to weaken an overly strong yen (per Al Jazeera). The yen had appreciated sharply due to debt problems in the United States and Europe, which hampered Japan's recovery from the March 2011 earthquake and tsunami and hurt the country's export competitiveness. In contrast, in 2026, Japan and the United States are intervening to strengthen an overly weak yen.

Why the Yen Has Been Under Pressure Lately

The yen has remained historically weak primarily because Japan's interest rates remain well below those of other major economies. Lower yields reduce the currency's appeal to global investors.

The Bank of Japan raised its benchmark interest rate to 1% in June—the highest level since September 1995—but it still trails the U.S. Federal Reserve's policy rate of 3.50%-3.75%.

Japan also continues to face structural challenges, including sluggish productivity growth and heavy dependence on imported energy, much of which is priced in U.S. dollars.

ETFs to Gain/Lose

Potential Winners

Yen-tracking ETF Invesco CurrencyShares Japanese Yen Trust FXY is likely to gain from the intervention. The ETF rose 1.5% in pre-market trading on Aug. 3, 2026.

As the latest intervention is expected to strengthen the yen and weaken the U.S. dollar, Invesco DB U.S. Dollar Index Bearish Fund UDN could also benefit. The fund was up 0.2% on Aug. 3, 2026.

With a moderately stronger yen, Japanese small-cap stocks are likely to outperform export-oriented large-cap stocks. As such, iShares MSCI Japan Small-Cap ETF SCJ and WisdomTree Japan SmallCap Dividend Fund DFJ are worth watching.

Potential Losers

Japanese exporters and export-heavy Japanese equity ETFs are likely to come under pressure. Export exposure has a significant influence on Japan's benchmark Nikkei 225 Index, as many of its constituent companies are multinational firms whose earnings are highly sensitive to overseas demand and currency movements. A stronger yen typically reduces the value of overseas earnings when translated back into yen, weighing on exporters' profitability.

iShares MSCI Japan Index Fund EWJ may thus underperform. However, U.S. dollar-hedged Japan equity fund iShares Currency Hedged MSCI Japan ETF HEWJ may fare even worse, as a stronger yen reduces the benefits of currency hedging. HEWJ fell 0.5% in pre-market trading on Aug. 3, 2026, while EWJ gained a modest 0.4%.

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