US Treasury Intervenes in Japanese Yen, but Experts Warn of Temporary Fix

The recent intervention by the US Treasury in defense of the Japanese Yen is not without controversy. According to Peter Boockvar, editor of The Boock Report, the real reason for this intervention is to prevent foreign holders from selling their US Treasuries and instead use funds for currency interventions. This move is seen as a temporary solution, rather than a long-term fix.

The Foreign and International Monetary Authorities (FIMA) Repo Facility, established by the Fed in March 31, 2020, and converted into a standing facility on July 28, 2021, has been used to facilitate this intervention. This allows Japan to access funds without having to sell US Treasuries, which could put upward pressure on long rates.

Boockvar believes that the Bank of Japan needs to raise interest rates and tackle inflation in order for the yen to rally. However, high debt levels in Japan are a concern and could offset any gains in the currency.