The U.S. is bailing out JapanU.S Treasury Secretary, Scott Bessent, is considering buying $5-10 billion worth of Japanese Yen as revealed by a Reuters photo of a note on Bessent's desk during the meeting with President Trump and the rest of the White House team at Camp David.
Earlier on Friday morning, around two hours before the photo was taken, Reuters reported that the Treasury had notified a number of banks that it may intervene in the yen market on Friday, quoting a source familiar with the situation.
Japanese authorities had stepped in to prop up the yen earlier on Friday in Tokyo. That triggered a substantial strengthening of the Japanese currency during morning trading hours.
There appears to have been another sizeable strengthening of the yen against the dollar during the late afternoon on Friday. Data from LSEG shows the dollar dropped from about 158.9 yen at around 4:14 p.m. (2014 GMT) to about 157.6 yen just before 5 p.m. (2100 GMT) — a drop of about 0.8%.
The U.S. Treasury has not intervened to prop up the yen since 2011, when it joined other G7 countries in a coordinated action after a devastating earthquake and tsunami rocked Japan.
The Japanese Yen is the weakest link in the USD global system. A collapse of the yen carry system would throw Wall Street into a crisis.
The yen carry trade involves investors borrowing yen at low interest rates and swapping into dollars to invest in assets that yield more, like US stocks and bonds.
The trade has helped funnel a lot of money into US markets, boosting liquidity and asset prices. This system has become increasingly fragile in the last two years and it worsened significantly when the U.S. and Israel attacked Iran, causing the subsequent global oil crisis which shook Japan's economy to the core and made worse by PM, Sanae Takaichi's grand plans of rebuilding the Japanese military through massive government spending causing inflation to rise, in stark contrast to the previous Japanese governments that were fiscally responsible and extremely cautious with public spending.
@CIG_telegram
