Japan and South Korea could coordinate currency intervention, but they may need U.S. support

Investors have been monitoring for potential intervention in the Japanese yen, but recent comments have triggered discussion about "coordinated intervention" with South Korea.

The Japanese yen has hovered around 34-year lows against the U.S. dollar. The currency has struggled, slipping past 150, since the Bank of Japan raised rates in March. Meanwhile, the South Korean won recently slipped to an 18-month low of 1,389.5 against the greenback. Authorities in both countries have called the movement in the currencies "excessive."

Following that volatility, the U.S. last week acknowledged Japan and South Korea's "serious concerns" over the recent sharp depreciation in their currencies. Treasury said all three sides agreed to "consult closely on foreign exchange market developments."

The comments spurred chatter about possible coordinated currency intervention.

That would fit a recent pattern of deeper and wider cooperation between Japan and South Korea, said James Brady, vice president with the political risk advisory team at consulting and advisory firm Teneo.

"It is not unreasonable for markets to speculate on coordinated action given the unprecedented statement mentioning 'serious concern' on the part of Tokyo and Seoul," Brady said.

More importantly, a joint currency move with would bring political as well as economic benefits to both sides if it succeeded in lifting both the yen and the won against the dollar, he added.

But Brady warned these moves would only have a lasting impact if done in coordination with U.S. counterparts. He explained that in absence of U.S. support, interventions in the yen typically see "a short-term bump, before the yen returns to its previous path."

Brady said South Korea and Japan could amplify their