Japan's Currency Intervention Has Little Impact on US Interest Rates

Recent articles and reader feedback have led to further discussion about the impact of Japan's currency intervention on US interest rates. The Wall Street Journal notes that Japan has intervened six times since 2022, totaling $300 billion in sales of US Treasury bonds.

The chart shows that these interventions had little impact on US interest rates, with some even leading to a decrease in the yield on ten-year Treasury bonds. In fact, if the intervention dates were not indicated on the chart, it would be impossible to determine when the interventions occurred based solely on the bond yield data.

A 2025 study by the Kansas City Federal Reserve suggests that a month-to-month sale of 1.9% of all foreign holdings of US Treasuries would initially raise US interest rates by 57 basis points, or 0.57%. By this standard, Japan's sole intervention in April of this year, totaling $72 billion, would have raised US bond rates by just 0.24%, assuming no change in other factors.

The smaller size of Japanese interventions relative to the total federal debt means they have had a negligible impact on US interest rates. Other factors such as oil prices, inflation, and unemployment far outweigh any potential effect from Japan's currency intervention.