
The first coordinated US-Japan intervention to stabilize the JPY in 15 years has raised some questions.
US Treasury Secretary Scott Bessent’s public call for the Fed to expand the Foreign International Monetary Authorities (FIMA) Repo Facility affirmed that Washington viewed extreme JPY weakness as not merely Japan’s domestic problem, but also a risk to US financial stability. As the world’s largest holder of US Treasuries, Japan could add pressure to elevated US bond yields. FIMA allows Japan an alternative route to borrow against Treasuries rather than sell them. The strategy appeared to have worked for now. The US Treasury 30-year yield eased for the first time in three sessions by 4.5 bps to 5.23% while the S&P 500 Index rose a third day by 1.5% to 7600.5 overnight.
The perception of Fed independence has probably weakened more than its formal independence. During his Fed Chair confirmation process in early 2026, Kevin Warsh affirmed the need for Fed independence in setting domestic monetary policy and deferring international financial matters to the executive administration, specifically the Treasury. This distinction may not always be obvious to investors. President Donald Trump described US participation in the coordinated support for the JPY as a “signal of friendship,” which aligns with the perception that the Fed’s global footprint has become closely aligned with his administration’s broader geopolitical and foreign policy objectives.
Despite investor scepticism about the JPY, speculators will struggle to hold on to their short JPY positions. USD/JPY has declined to 157-158, more than offsetting the rise from 160 to 164 following the hawkish June FOMC meeting. These speculators should also be mindful that the Japanese finance ministry is looking to boost demand for the JPY and JGBs, including encouraging the country’s Government Pension Investment Fund to buy more domestic assets. Not surprisingly, Bessent posted on the social media platform that the US will not hesitate to participate in further joint intervention if the JPY’s disorderly movements persist. It was also notable that the US reportedly sold euros instead of dollars for yen. Apart from USD/JPY’s support level at 155, markets will also need to pay close attention to downside risks in the JPY carry trades, namely, the support levels for EUR/JPY at 180, and the one at 109 for AUD/JPY.
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