US Treasury Intervenes in Yen Crisis, But Not for Expected Reasons

The US Treasury has intervened to support the Japanese yen, but not for the reasons one might expect. According to Peter Boockvar, editor of The Boock Report, the real reason is to prevent foreign holders from selling US Treasuries while intervening in the currency market.

The Foreign and International Monetary Authorities (FIMA) Repo Facility, established by the Fed on March 31, 2020, has been used as a temporary fix. This facility allows Japan to use funds for intervention without having to sell US Treasuries.

Despite this intervention, Boockvar believes that something more substantial needs to happen to support the yen. He suggests that raising interest rates by the Bank of Japan and tackling inflation could help stabilize the currency.

The Japanese government's high debt levels are a concern, however, and may offset any benefits from rate hikes. If JGBs become more attractive, US Treasuries may still be seen as a safe haven for foreign investors.