Yen Plunges to 40-Year Low, Triggers Global Debt Doom Loop
The yen hit a 40-year low against the US dollar in July, touching 164 to one USD. Analysts attribute this to the differential between interest rates in the US and Japan, but note that the Fed has kept rates unchanged while Japan sold US bonds to support the yen.
On July 31, the US Treasury Secretary Scott Bessent announced a coordinated currency intervention with Japan, using the FIMA Repo Facility capped at $60 billion. The joint effort led to a bounce back of the yen to 155 and 157 per dollar last week.
The Japanese government and Bank of Japan conduct interventions by selling US dollar bonds, which leads to higher US Treasury bond yields and upward pressure on interest rates. This has significant implications for residential property sales and household confidence.