US and Japan Intervene in Currency Markets to Support Yen

The US and Japan have intervened in the currency markets for the first time since 2011 to prop up the yen, which had fallen to a 40-year low. The joint action saw Japan sell almost $60 billion to support the yen, while the US spent between $5 billion and $10 billion. This move has been met with caution, as some analysts worry that it could lead to higher interest rates in the US.

The timing of the intervention is being closely examined, particularly given the recent earthquake in Japan and the prospect of a Federal Reserve rate rise next month. The Bank of Japan had delayed an interest rate hike last week due to the earthquake, which may have contributed to the yen's weakness.

The impact of the joint action on US bond yields is also being watched closely, as some analysts believe that Japan may liquidate its Treasuries to raise dollars for the intervention. However, Scott Bessent notes that a Fed repo facility using Japan's bond holdings as collateral has been activated.