Why America intervened to prop up Japan’s yen | The Economist

Scott Bessent, the. US treasury secretary, has basically bought. an awful lot of yen. in order to prop up. its value, to try and. stop it from weakening. There are a couple of unusual. things about this. One is that he used euros. rather than dollars to buy the yen. The other is the way. we know how much yen. he bought. One thing. I adore is the. high camp theatricality. We know that. he's bought 5. to $10bn worth of yen. because he allowed a photographer. to take a picture of his notepad.

at a cabinet meeting. and the notepad says to do. buy Japanese yen. 5 to $10bn. That's the only thing on the to do list: buy Japanese yen. 5 to $10bn. That's all. I mean like. you couldn't. get more theatrical. unless you paid Patti LuPone. to belt it from the rooftops. I think it's worth saying. from the Japanese perspective. this is an intensification of efforts. that had already been underway. It came on the back of a $73bn. unilateral intervention.

just by the Japanese government. in May. and repeated efforts. by the finance minister. and other officials in Japan. to jawbone the market. to get the yen to cooperate. It used to be that a weak yen. was considered. a good thing for the Japanese economy. It boosted exports, Japan has a lot of. very strong multinationals. where a weak yen. improves their competitiveness abroad. But now it's seen. as really a problem for them. It pushes up import costs. It's seen as feeding into. above 2% inflation in Japan. It's pinching consumers.

and it's leading to issues. with overtourism, which has become a political issue. for the government. Bloomberg recently reported that Prime. Minister Takaichi's. government is now open. to the Bank of Japan. raising interest rates. in September and October. That would have been a very hard thing. to imagine were it not for the weak yen. So you're seeing this really change. the thinking of the government. That's why. it matters. in the Japanese context. For America I think it matters. because of the interactions. between Japan. and the US Treasury market. And then just more broadly.

for the world, for global. financial markets. it matters because of the deep linkages. between what happens in Japan. and the rest of the world.