US-Japan Joint Intervention Sparks Rebound in Yen, Raises Questions About Global Capital Flows

The United States and Japan have joined forces in an unprecedented intervention to support the yen, causing its exchange rate to rebound sharply from a nearly 40-year low. The yen has risen to 157.40 against the dollar within two days, prompting market reassessment of the global capital flow model that relied on low-interest-yen financing.

The rare joint effort by the U.S. and Japan has sparked speculation about the end of the yen arbitrage era and potential adjustments in global capital allocation. As Japan may sell foreign exchange reserves to defend its currency, the long end of the U.S. Treasury yield curve is being reassessed, pushing global capital markets into a new normal dominated by liquidity restructuring.

U.S. Treasury Secretary Mnuchin stated that the U.S. would not hesitate to participate in further joint intervention actions to correct the severe undervaluation of the yen. President Trump emphasized that this intervention reflects the U.S.-Japan alliance and anticipates that Washington will gain substantial financial benefits from this joint action.