US Treasury Secretary Intervenes in Japan's Currency Market
The US Treasury secretary has intervened in Japan's currency market to stabilize the yen, which has been sliding against the dollar. The move is seen as an attempt by Scott Bessent to preserve a cheap funding pipeline for global finance, particularly for Wall Street.
Japan's ultra-cheap money has become a global funding utility, with bankers borrowing yen to buy higher-returning US assets, such as tech shares. This 'carry trade' has contributed to rising American stock markets and supported collateral and investment in AI research, which has sucked up over 1% of US GDP.
Traders are probing the resolve of Washington, which wants to keep this tap open without collapsing the yen or selling US treasuries. A stronger yen would shrink the gap between investors' returns and yen borrowing, making it more expensive for them to repay debts.
The Treasury secretary has used a Federal Reserve lending facility to help Japan stabilize its currency, allowing Tokyo to borrow dollars against its treasuries and use those dollars to buy yen. This move is seen as a way to avoid a chaotic market unwind if the yen were to slide back to 164 yen to the dollar.