Source: Fortune
Summary
The US and Japan have intervened in the foreign exchange market to boost the yen, which had hit a 40-year low. The US sold euros to fund the purchase, rather than selling dollars. This is the first time the US and Japan have jointly bought the yen since 1998. Japan is estimated to have spent $52.8 billion, while the US’s exact amount is unknown. Experts warn that the intervention may not address the underlying issues driving the yen’s weakness.
Our Reading
The announcement sounds familiar.
The US and Japan’s joint intervention has lifted the yen to 157 to the dollar. Treasury Secretary Scott Bessent’s notepad suggests the US may have spent between $5 billion to $10 billion. Experts like Mark Sobel and Robin Brooks question the effectiveness of the intervention, citing Japan’s “overly accommodative” monetary policy and debt concerns. The use of euros instead of dollars has raised eyebrows, with some calling it “weird” and “unwise”.
The yen’s weakness is attributed to Japan’s monetary policy, debt concerns, and Prime Minister Sanae Takaichi’s fiscal policy. The intervention may be seen as a confidence game, but experts predict the yen will resume its decline. The Bank of Japan’s efforts to keep bond yields low may not be enough to prevent a crisis.
Author: Evan Null
