G7's 'Shock and Awe' Fades in Favor of Bilateral Deals

Last week's U.S.-Japan joint intervention to support the yen lacked full G7 firepower, which is unusual for such a coordinated global effort.

The operation involved buying yen and was transactional in nature, rather than a collective show of force from all G7 nations.

As a result, the intervention may not be as effective in achieving its goals, and currency markets are left with more questions than answers.

According to U.S. Treasury Secretary Scott Bessent, Washington was concerned about the potential impact of a massive Japanese intervention on the U.S. Treasury bond market, particularly since Japan is the largest foreign holder of U.S. Treasuries.

The Fed provided Japan with dollars through repo operations while the U.S. sold euros instead of dollars, which may have reduced that risk.