Propping up the yen may be more helpful for the US than if Japan hikes interest rates which is on the table (Google ’bring money home‘). The carry trade buying treasuries with debts incurred in yen has been a steady source for US funding. Eventually it will happen with collateral impact on treasury rates but this ‚supportive‘ move may just shift it past November.
US Treasury undertakes historic intervention in yen market
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Re: US Treasury undertakes historic intervention in yen market
#42Not to repeat myself, but I'll point to earlier comments about what's going on with interest rates [1].
For some context here, it's worth mentioning the Yen carry trade [2]. This is actually relevant because it allegedly underpins the AI investment boom [3] and the Yen appreciating is a real problem for investors who borrowed Yen to invest, particularly if it's into a bubble that may well pop. It's a double shammy.
I'm wondering if this is going to be another George Soros moment. Soros famously broke the Bank of England who were trying to maintain a rate for the pound [4]. If massive AI investment is fueled on the Yen then there's a pretty big icentive to break the Yen by investors. This administration would normally be on board with that sort of thing (and actively profit from it) so it's not yet clear to me what's going on.
[1]: https://news.ycombinator.com/item?id=49119122
[2]: https://www.economicshelp.org/blog/glossary/yen-carry-trade/
[3]: https://www.businessinsider.com/yen-carry-trade-unwind-stock...
[4]: https://www.investopedia.com/ask/answers/08/george-soros-ban...
Re: US Treasury undertakes historic intervention in yen market
#43Wait, no way! Someone posted a zoomed up photo of a US official (can't recall who) of a notepad a few days ago saying "To do: Buy Yen 5Y - 10Y" or something similar
Bessent wrote that note very large and intentionally left it visible in hopes that it would be photographed and the market would do the work for him. If the market believes the US Government is going to spend $10B on JPY, it will happily price it right in without the US having to spend a penny.
It does have an air of Austin Powers about it.
Dr Evil's notepad in his evil lair.
"To Do: Kill Austin Powers tomorrow!"
Re: US Treasury undertakes historic intervention in yen market
#44Historic, yes. Unprecedented, no.
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.
(From TFA.)
The Asian Financial Crisis of the 1990s was one of several that occurred during that decade (also: the recession triggered by the 1st Gulf War 1992, the Mexican Peso crisis of 1994, the Russian financial crisis of 1998, and arguably the post-dot-com bust in 2001, stretching the decade just a tad). For those present at the time, the dot-com boom was a short-lived (though extravagent) interval, beginning in late 1998, spiking early 2000, and crashing out in early 2001.
https://en.wikipedia.org/wiki/1997_Asian_financial_crisis>
Re: US Treasury undertakes historic intervention in yen market
#45Earlier quoted context omitted.
Japan has to sell off its bonds to get dollars to buy oil with since oil is so expensive. I wonder why that happened.
No. That has nothing to do with this. Setting aside the obvious fact that the BOJ does not buy oil, they’ve been engaged in a (futile) currency defense scheme since long before the Iran conflict. This is purely about the interest rate spread.
It is not completely but part of the reason Japan wants to defend it's currency is inflation because of increase in energy prices.
Re: US Treasury undertakes historic intervention in yen market
#46[dead]
Re: US Treasury undertakes historic intervention in yen market
#47Wait, no way! Someone posted a zoomed up photo of a US official (can't recall who) of a notepad a few days ago saying "To do: Buy Yen 5Y - 10Y" or something similar
Which is hilarious because 5-10 billion dollars worth of Yen is not going to do much in the grand scheme of things. It’s a speed bump not a stop sign.
[dead]
Re: US Treasury undertakes historic intervention in yen market
#48Earlier quoted context omitted.
Japan has to sell off its bonds to get dollars to buy oil with since oil is so expensive. I wonder why that happened.
No. That has nothing to do with this. Setting aside the obvious fact that the BOJ does not buy oil, they’ve been engaged in a (futile) currency defense scheme since long before the Iran conflict. This is purely about the interest rate spread.
Investor fears about rising oil prices and how Japan’s Prime Minister Sanae Takaichi can afford her fiscal stimulus plans recently pushed the yen towards 40-year lows
From TFA.
Re: US Treasury undertakes historic intervention in yen market
#49Can anyone steel man the “this isn’t a big deal” side of this? On x and reddit all I see are sky is falling posts.
Not really what you asked for, but what I would say is that this specific incident isn't like some huge deal or something. It's just the USA doing something that helps Japan stabilize its currency, and helps the USA avoid a spike in people selling US treasuries (which would raise US borrowing costs). It's unusual, but not earth shattering or crazy. ____________________ The wider picture looks rather worrysome though.…
> unilaterally converting some already sold bonds to '100 year bonds'
Is this even legal? I mean, is this possibility stated in some terms and conditions that one must accept when purchasing a bond?
Re: US Treasury undertakes historic intervention in yen market
#50[deleted]