US-Japan Intervene to Save Yen from 40-Year Low

The US and Japan have taken an unprecedented step in jointly intervening to prop up the value of the Japanese yen, which has been plummeting towards a 40-year low. The move is seen as a rare bilateral intervention, with the last instance dating back to 2011 after the devastating earthquake, tsunami, and nuclear accident.

According to a memo on US Secretary of the Treasury Scott Beasant's desk, the instruction was to 'Buy Japanese Yen (JPY) 5-10 billion', hinting at desperation from Tokyo. The dollar has fallen to 157 yen following the announcement, down from 164 in the previous week, considered by Morgan Stanley as the highest tolerable point for the Japanese government.

The weak yen is a symptom of Japan's beleaguered economy, plagued by low productivity, labor shortages, and an outdated economic model. Foreign intervention is just the latest attempt to save the currency, with the Japanese government already having spent $74 billion this year, only to see it work for three weeks.

The real concern for the US, however, lies in what might happen if Japan repatriates some of its vast overseas assets, including $1 trillion worth of US Treasury securities. This would push bond prices down and increase yields and interest rates at a time when the US national debt has reached almost unimaginable levels.