US Bails Out Japan Amid Dollar System Crisis

The US Treasury intervened in the foreign exchange market to prop up Japan's yen, marking the first time since 1998 that Washington has done so. This move is not just about Japan, but reflects a deeper crisis in the dollar system.

The intervention was an 'unusual operation' according to Bloomberg, with US Treasury Secretary Scott Bessent stating that it was necessary to support Japan in a way that benefits the American economy and taxpayer. However, Bessent's true motives may be more complex: as a former hedge fund manager from Wall Street, he has a vested interest in propping up the dollar-based financial system.

Japan plays a special role in the US empire, hosting over 120 military bases and 50,000 US troops. Tokyo also acts as the largest foreign holder of Treasury securities, lending more money to the US than any other country. In February 2026, Japan owned around $1.24 trillion in Treasuries.

However, Japan has been reducing its holdings in recent months, selling some of its Treasury securities and intervening in the foreign exchange market. This has caused concern for Washington, which is worried about rising yields on US Treasury securities. The US Treasury has responded by increasing liquidity support buyback operations for longer-dated nominal coupon securities.

This move reflects a growing crisis in the dollar system, as countries begin to dedollarize and reduce their reliance on US currency. China, for example, has been steadily reducing its net investment in US government debt over the past decade.