Japan's Yen Rescue Sparks Asian Financial Crisis Memories

Japan's efforts to prop up its currency have sparked memories of the Asian financial crisis, according to former top currency diplomat Naoyuki Shinohara. The latest joint action between Tokyo and Washington has similarities with how countries handled dollar liquidity in the late 1990s.

The US Treasury Secretary Scott Bessent encouraged Japan to use dollar swap lines instead of selling US Treasuries to finance future intervention, a move reminiscent of the Asian financial crisis.

Naoyuki Shinohara, who served as the IMF's deputy managing director after a stint as Japan's vice finance minister for international affairs, noted that access to dollar liquidity became a critical issue across the region during the crisis.

The situation today is not comparable to Thailand's situation back then, but the dynamic is uncomfortably similar, Shinohara said. Being asked by Washington to use swap lines and avoid selling Treasuries evokes memories of that period, he added.