G7's Retreat from Currency Coordination Exposed by US-Japan Yen Intervention
Markets remain wary after last week's joint US-Japan operation to support the yen, which lacked the full backing of the Group of Seven (G7) and failed to calm investors. The initiative was seen as a bilateral move rather than a multilateral agreement on exchange rates.
The silence from other G7 powers matters, especially given the yen's brief recovery has done little to alleviate concerns about its strength. The operation sparked debate over its timing and motivation, with experts questioning why the entire G7 did not join in to amplify its effect.
Japan may have been forced to sell some of its US government bonds to finance a prolonged campaign to sell dollars in a volatile market. The US participation, with dollars provided through repo operations while selling euros instead of dollars, reduced the risks for both nations.
The lack of coordination among G7 economies points to a trend towards bilateral agreements and practical arrangements within the US administration. This is a departure from multilateralism as the primary model of engagement.