Yen Intervention Sparks Concerns Over Currency's Future
The yen's recent reversal has been dramatic, with a sharp decline in its value that some attribute to divine intervention. However, experts argue that this is not the case, but rather a sign of the currency's underlying weakness.
Japan's current account surplus and status as the world's largest creditor nation would suggest a strong yen, but the opposite has been true for three years. The market has consistently pushed the currency to levels not seen in four decades, despite Japan's robust economy.
The US-Japan intervention this summer marked a turning point, with rising interest rates and joint efforts from both nations. However, critics argue that this may be too little, too late, as Japan's debt story does not explain the currency's weakness.
Scott Bessent, a yen bull, believes that when the yen finally turns, domestic institutions will bring their money home, causing a rally in the currency. This has happened before, and Bessent expects it to happen again.
The pressure is already showing, with cheap yen funding fueling the technology rally across Asia. As the yen strengthened, margin calls in both Japan and Korea have been severe, and the US Treasury has intervened for the first time in two decades.