Why the Korean Won Remained Strong After the U.S.-Japan FX Intervention

I’ve had my exchange rate app notifications on silent for two months now.

Just as I was getting tired of the constant “ping, ping” alerts, news broke in early August that “the U.S. and Japan have jointly intervened in the yen market.”

At first, I brushed it off. What did the yen have to do with my wallet?

But a few days later, after reading that the won/yen exchange rate had hit its lowest level in over two years, I realized this wasn’t just someone else’s problem. I spent the last few weeks piecing together the headlines. To put it simply: while the yen slipped back into weakness, the won maintained its strength, and the reason wasn’t the intervention itself, but the actions of domestic exporters.

The U.S.-Japan Joint Intervention: What Happened?

It all started with oil prices, not currency intervention.

In early June, fears of an armed conflict between the U.S. and Iran sent international oil prices soaring, pushing the won/dollar exchange rate to an intraday high of 1,561.5 won on June 8. It was the highest level in 17 years and 3 months, since the 2009 global financial crisis.

Around the same time, the yen’s weakness was reaching its limit in Japan.

By late July, the dollar/yen rate in the New York market neared 164, the lowest level in about 40 years. Unable to bear the burden of import costs any longer, the Japanese government and the Bank of Japan intervened starting on the night of July 30, buying yen and selling dollars. The Japanese Finance Minister officially acknowledged that they coordinated with the U.S. Treasury to intervene in the yen market. It was the first time in 28 years—since the 1998 Asian financial crisis—that the U.S. directly participated in buying the yen, and the first joint U.S.-Japan intervention since the 2011 Great East Japan Earthquake. It was an exceptionally rare move.

The scale was significant as well.

Local media, including the Nikkei, estimated the intervention size at 6 to 7 trillion yen (55 to 64 trillion won), based on changes in the Bank of Japan’s current account balances. The effect was immediate.

The dollar/yen rate, which had been in the 163 range, plunged to the 157 range in a single day, and speculative short positions on the yen dropped by 72% in just one week—the largest decline since related statistics began in 1992.

The problem was that the effect didn’t last. By mid-August, the dollar/yen rate drifted back up to the 157–160 range. Analysts argued that “given Japan’s expansionary fiscal policy and low growth potential, a trend reversal for the yen is difficult,” and rumors spread that there was little room for further intervention.

The Real Reason Why the Won Remained Strong

If the yen started wavering again, why did the won remain strong?

The answer lies not in the aftershocks of the U.S.-Japan intervention, but in domestic supply and demand issues that occurred afterward.

Immediately after the joint intervention on August 3, the won/dollar rate followed the yen down to the 1,420 range. That was an expected flow. But even after the yen turned back to weakness in mid-August, the won actually continued to strengthen. On August 19, the won/dollar fell into the 1,300 range (1,388.5 during trading) for the first time in 11 months, and hit 1,386.5 (1,380.3 during trading) on August 21. A decoupling occurred where the yen weakened while the won strengthened.

This is the most important takeaway from this trend.

Domestic exporters flooded the market with dollars received as payment for their exports, converting them into won. This pushed the won higher, regardless of what the yen was doing.

In short, while the early August strength of the won was driven by the yen, the strength after mid-August was purely a result of domestic supply and demand. It isn’t because the Korean economy suddenly improved, but because the yen’s reversal, U.S.-Japan policy cooperation, and domestic exporters’ dollar selling all converged.

As a result, the won/yen exchange rate (the value of the won per 100 yen) fell to 887.84 on August 13.

This is the lowest level since July 2024. Considering it was around 950 during the first half of the year, it has dropped significantly in just two months.

What Does 887 Won/Yen Mean for Japan Travel and Direct Imports?

A lower won value per 100 yen means you can buy more yen with the same amount of won.

Compared to the 950-won level in the first half of the year, the 887-won level in August means you get about 60,000 to 70,000 more yen for every 1 million won. For travel expenses, that’s enough to cover a night or two of accommodation, so if you’re planning a trip to Japan or direct imports, now is a good time to time your purchases.

The Burden of a Strong Won on Exporters: How Long Will It Last?

The same numbers create a burden on the other side.

For exporters competing with Japanese products in the Japanese market, a strong won erodes price competitiveness. This isn’t just a abstract concept for the logistics managers checking shipping documents at Busan Port.

More importantly, no one can guarantee how long this trend will last.

Experts and foreign exchange authorities are already saying that there is limited room for further U.S.-Japan intervention. The direction could change again depending on whether the Bank of Japan raises interest rates further at its September monetary policy meeting or if the U.S. signals further policy coordination.

As noted in our article on asset strategy for the second half of 2026, yen volatility is likely to remain a variable for both Korean exporters and the asset market for some time.

To summarize: mid-June Middle East-driven extreme weakness of the won → late July joint U.S.-Japan yen intervention → early August joint strength of won and yen → mid-August onwards, yen weakens but won remains strong. That was the sequence. I only realized how much had happened in two months after looking up the data. It was a moment to realize that exchange rates don’t move based on the situation of just one country, and since the flow can flip at any time if U.S.-Japan policy cooperation or domestic supply and demand change, it’s worth keeping a close watch for the time being.