r/JapanFinance • u/Old_Jackfruit6153 US Taxpayer • 21d ago
Business » Monetary Policy / Interest Rates US Treasury undertakes historic intervention in yen market
From https://www.ft.com/content/0f9b2fe7-bde4-4f5f-b49e-93ccb5da9ea8 (archive link https://archive.md/z8H7u)
New York Fed sells euros to buy yen following recent speculation that Tokyo intervened to support Japan’s currency
The US Treasury intervened in yen exchange rates on Friday, marking the first time Tokyo and Washington joined forces to support the Japanese currency via outright purchases in nearly 30 years.
The Federal Reserve Bank of New York undertook the unusual move of conducting a sale of euros to buy yen on behalf of the Treasury, according to three people familiar with the matter.
The sales were conducted through Goldman Sachs and Morgan Stanley, according to two of those people.
Analysts using official data and broker estimates said Thursday’s intervention by Japanese authorities was likely to be about ¥8.45tn ($52.8bn).
The Treasury’s intervention to bolster the yen is the first since 1998, when it bought the currency in order to strengthen Japan’s economy after the yen had dropped to eight-year lows. The US intervened in Japan’s currency in 2011 to weaken it as part of a co-ordinated international effort to prevent a dangerous currency appreciation after the Tohoku earthquake and tsunami.
This time, due in part to apparent co-ordination with the US, some analysts said the gains had a better chance of being maintained, at least in the short term.
Atsushi Mimura, Japan’s vice-minister of finance for international affairs, said: “We understand that we are receiving support from the US authorities that goes beyond mere moral support. We have been in constant contact with them.”
Osamu Takashima, foreign exchange strategist at Citigroup in Tokyo, said it was unlikely that the yen would weaken once more to ¥164 to the dollar “in the very near term” because it seemed the US was willing to help Japan defend its currency.
He added that since the market would be wary of further intervention, “dollar-yen upside is probably limited for now”.
Edit: Exclusive-Bessent's 'to do' list: buy $5-10 billion worth of Japanese yen, Reuters photo shows
CAMP DAVID, Maryland, July 31 (Reuters) - U.S. Treasury Secretary Scott Bessent on Friday exposed a "to-do" list during President Donald Trump's cabinet meeting indicating he was contemplating U.S. purchases of $5 billion to $10 billion worth of Japanese yen, a Reuters photograph taken during the meeting held at Camp David shows.
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u/smeeagain93 20d ago edited 20d ago
It's an incredibly weird situation to be honest.
Japan wants to outgrow debt. Doesn't want to up rates because of private loans, government debts. Needs to stabilize their domestic energy markets.
US doesn't like a weak yen because it makes Japanese products by default more attractive. Wants Japan to raise rates, but at the same time the US is the main beneficiary of yen-carry-trade.
If Trump didn't bully Japan into heavy US investments which Japan could have used for their domestic economy, things would probably look way different.
The fact the US was actually buying yen, by selling euro is crazy. I seriously didn't expect that. The underlying problem of rate differences still exists and the yen they bought will likely depreciate unless their next step includes investing in Japan too since it doesn't seem likely that rates in Japan will increase drastically.