Japan holds a huge amount of US treasuries, and I guess was considering a mass sell off to raise cash to defend the Yen.<p>US treasury bond yields are already dangerously high for the US and Japan selling treasuries would push yields up even higher, and could trigger more panic selling from others.<p>I guess this is Bessent's scheme to try and kick that can down the road.
> I guess this is Bessent's scheme to try and kick that can down the road.<p>This can be summed up policy for pretty much every single administration since I've been alive. For almost every single massively looming problem - financial, domestic, and foreign policy. Various degrees of can kicking I suppose, but the can shall be kicked regardless.
> kick that can down the road<p>With two left feet and a couple of swings and misses, the can isnt in much danger.
This would be a dumb move. If Japan's treasury started selling a large amount of US debt, the Fed could buy it up and pay interest to itself.<p>Japan would then have a whole bunch of non-interest-bearing US dollars and the Fed would have a lot of interest-bearing US bonds.<p>Now it's true that Japan's treasury could then use those dollars to buy something else like stock in US companies but they could have done that all along anyway. They bought the debt for the coupon payments.<p>What's actually happening here is what it looks like: Japan's economy is starting to seize up due to the Iran war. Since they have to import all their oil they're suffering from a currency crisis (they can't export enough to balance payments on their oil bills). The US is stepping in to support them because 1) Japan's current government is allied politically with Trump and 2) Japan's an important geopolitical ally that is being hit <i>very hard</i> by the Iran war.
It's a big world. There are a lot of places to buy oil from. And the balance of payments is not that complicated with energy - like where do Middle East OPEC members reinvest their dollars? In world assets. Like Japanese companies.<p>IMO, the far more impactful geopolitical conflict is still the war in Ukraine, between two countries with allies that actually have deep ties to the rest of the world, with casualty counts exceeding a million people.<p>But nonetheless the problems there, in Japan, are the same that generations of Japanese have already identified as a big problem, predating the fall of Bretton Woods or whatever modern top down policies: the patriarchy, nepotism and xenophobia... Many similar problems to the West. You cannot <i>bank</i> or <i>math</i> your way out of a suffocating patriarchy, which is to say, the humanities people have always had a bigger impact on our day to day lives than the people crunching for Jane Street interviews.
Japan has to sell off its bonds to get dollars to buy oil with since oil is so expensive. I wonder why that happened.
Surely he isn’t competent enough to do anything else.
Historic, yes. Unprecedented, no.<p><i>The Treasury’s intervention to bolster the yen is the first since 1998, when it bought the currency in order to strengthen Japan’s economy after the yen had dropped to eight-year lows. The US intervened in Japan’s currency in 2011 to weaken it as part of a co-ordinated international effort to prevent a dangerous currency appreciation after the Tohoku earthquake and tsunami.</i><p>(From TFA.)<p>The Asian Financial Crisis of the 1990s was one of several that occurred during that decade (also: the recession triggered by the 1st Gulf War 1992, the Mexican Peso crisis of 1994, the Russian financial crisis of 1998, and arguably the post-dot-com bust in 2001, stretching the decade just a tad). For those present at the time, the dot-com boom was a short-lived (though extravagent) interval, beginning in late 1998, spiking early 2000, and crashing out in early 2001.<p><<a href="https://en.wikipedia.org/wiki/1997_Asian_financial_crisis" rel="nofollow">https://en.wikipedia.org/wiki/1997_Asian_financial_crisis</a>>
Wait, no way!<p>Someone posted a zoomed up photo of a US official (can't recall who) of a notepad a few days ago saying "To do: Buy Yen 5Y - 10Y" or something similar
It was US Treasury Secretary Scott Bessent<p><a href="https://www.reuters.com/world/asia-pacific/bessents-to-do-list-buy-5-10-billion-worth-japanese-yen-reuters-photo-shows-2026-07-31/" rel="nofollow">https://www.reuters.com/world/asia-pacific/bessents-to-do-li...</a>
Bessent wrote that note very large and intentionally left it visible in hopes that it would be photographed and the market would do the work for him. If the market believes the US Government is going to spend $10B on JPY, it will happily price it right in without the US having to spend a penny.
Which is hilarious because 5-10 billion dollars worth of Yen is not going to do much in the grand scheme of things. It’s a speed bump not a stop sign.
Japan's industries have been squeezed hard by China's rare earth sanction and global energy price. I'm not sure some financial operations can wiggle them out of the situation.
<a href="https://archive.is/lAaaZ" rel="nofollow">https://archive.is/lAaaZ</a>
Propping up the yen may be more helpful for the US than if Japan hikes interest rates which is on the table (Google ’bring money home‘). The carry trade buying treasuries with debts incurred in yen has been a steady source for US funding. Eventually it will happen with collateral impact on treasury rates but this ‚supportive‘ move may just shift it past November.
Yes. Let’s not forget that the last time the BOJ hinted at rate normalization, it caused a global bond market freakout, a spike in Treasury rates, and a collapse in Asian stocks (the “BOJ Shock” of December 22).<p>One can make a reasonable story that this led to the SVB collapse.
Japan is the sort of canary in the coal mine.<p>so yeah if the yen pops - then the u.s will too given all the 'a.i' shenanigans & the market manipulation with oil.<p>but I guess the US Treasurer is willing to manipulate the market till they can't.
Can you elaborate?
Japan is a what? They've been dumping billions of dollars and trillions of yen into their economy since the 1990s. How is this any different than the past thirty years of intervention? I stg you guys. I get that ginning up a conspiracy gives you agency in a powerless world but come on.
If you can manipulate the market why not do it?<p>Literally no one benefits from the alternative.
Manipulation of the market never comes for free.<p>You just delay, and render unpredictable, the eventual reckoning, for short-term benefits.<p>It will be interesting to see who’s gonna blame the <i>free</i> market when that day arrives.
> You just delay, and render unpredictable, the eventual reckoning, for short-term benefits.<p>After a century, those short-term benefits add up to a long term benefit.
Manipulating the market is literally the job of both the Treasury and the FOMC. It’s how we enact monetary policy.
> Literally no one benefits from the alternative.<p>Future you might disagree with present you. But even if we disregard time, I think millions of consumers would benefit from the opportunity to have competitive markets again. If an actual economic forest fire was allowed to burn, we might eliminate some of the too-big-to-fail corruption and oligopoly that is the norm now and provide space for new seeds to grow.
The problem with this idea which is common in some circles is that most of the businesses involved are commodity or lowish margin. They likely got built either with government support or before the current margin's were a thing. Becdause you can't make a high enough ROI on building a new competitor your seeds will likely die in barren soil never having germinated. In today's markets the likely result will be increased business going to China, India, Vietnam and the like. If you're talking about banking then the worst possible scenario at a national level is that you're borrowing money denominated in a foreign currency. The adventure after 1929 was a result of deliberate policy to liquidate and let it burn.
You can’t have competition forever. At some point someone wins decisively, and then there is only the illusion of competition.
We already have anti-trust and other regulation to manage this problem, we simply need to use it.<p>There's no end of competition, the world changes, companies bloat and make bad choices, smaller competitors can react and change faster - it's only in our corporate hegemony that we don't consider that a viable alternative.
Can anyone steel man the “this isn’t a big deal” side of this?<p>On x and reddit all I see are sky is falling posts.
Hold on there. The reason you mostly see sky is falling posts is that those get <i>more engagement</i>, both positive and negative. "Everything is fine" doesn't cause a reaction in a reader.<p>This is inherent to social media. It's bad for us, too, because it eventually tricks our brain into thinking the sky is always falling, no matter how we try to talk ourselves out of it.
Curious what others think. In my small real offline world, it seems this has caused people to get worked up about the sky falling a few times and then quit paying any attention to the sky or boy crying wolf at all.<p>Which means when events actually happen that will have a large negative impact on their life or their descendants, they just don't care. Which then results in another metaphor - boiling a frog.
The sky has been falling for the Yen for about thirty years now. At this point it feels like the boy who cried wolf.
Best I can do is point out that much of American economic history for the past 300 years has been stumbling from crisis to crisis, and somehow we muddle through. A good book to understand this is <a href="https://a.co/d/0aTW4L6D" rel="nofollow">https://a.co/d/0aTW4L6D</a>
Here’s the likely rationale from one of the FT comments:<p>“It looks like the Japanese economy is on the BoJ [Bank of Japan] ventilators. I mean, the BoJ is the largest single holder of Japanese equities, government bonds (JGBs) and currency (JPY). It’s likely that the BoJ is printing more yen to finance Japan Inc, which in turn is probably the driving force behind inflation.<p>[…]<p>BoJ is the largest foreign bank holding USTs [US treasuries], around $1.14tn, it’s likely that they would have had to sell some treasuries to finance JPY purchases. My view is that, this scenario is not ideal for the US Treasury – particularly right now with the UST yield curve steepening – hence they had to “return the favour” by selling EURJPY”<p>—-<p>tl;dr in my layman interpretation: US helps Japan by selling (shorting) EU in a debt-exchange triangle. The US didn’t have much choice, as Japan would have sold USD, which they hold plenty of, to finance their spending spree. They just have to hope their bet on JPY vs EUR pays off in the long-term.
Why would the sky be falling? Getting the world's largest economy to prop up your own economy is kind of the point to being an ally of the biggest economy in the world; the Japanese and American governments being in bed together and planning the Japanese economy is not just normal, but is one of the bigger conspiracy theories persisting from the 1980s when US intervention is blamed as the reason Japan's economy stagnated in the 90s. So I don't understand why this would be a sky is falling moment.
Because then the world's largest economy suddenly needs to de-lever to afford the oil you made more expensive. The USA government <i>will</i> enter a debt-interest spiral if Japan sells its bonds. There will be no recovery from that besides, maybe, hyperinflation through printing away the debt.
Not really what you asked for, but what I would say is that this specific incident isn't like some huge deal or something. It's just the USA doing something that helps Japan stabilize its currency, and helps the USA avoid a spike in people selling US treasuries (which would raise US borrowing costs).<p>It's unusual, but not earth shattering or crazy.<p>____________________<p>The wider picture looks rather worrysome though. Japan has spent decades building up a nest egg of US treasuries as a way to try and fight of deflation. Now, they have inflation and currency depreciation, so the extremely natural thing to do is for Japan to sell their accumulated assets to defend their currency and dampen inflation.<p>The USA on the other hand has been going around with a fork and sticking it in electrical sockets, and has earned a reputation for being extremely erratic and unfocused on stability. The USA also has zero plan or intention to get its debt burden under control.<p>This makes investors who hold US treasuries nervous. They see increasing geopolitical instability, increasing political disfunction in the USA, and the early stages of a USA debt crisis that could end in debt defaults (Bessent has already actually hinted at this, when he suggested unilaterally converting some already sold bonds to '100 year bonds').<p>This situation has caused US borrowing costs to go up, and japan switching from a net treasury buyer to a net treasury seller would make it harder for the USA to sell more bonds without giving even higher interest rates, which just makes the current debt troubles worse.
Don’t forget the EUR side to the operation. US is helping Japan by selling Euros. The big question whether this is a sensible bet.
As a European, I'm somewhat sensitive to that side of things, but if you look at the USD-EUR exchange rates, the Euro has only strengthened against the USD since this happened.<p>I guess it's just not a big enough shift to change the overall USD-EUR dynamics. Plus, I think a lot of the Eurozone wouldn't actually mind if the Euro weakened a litte, even if it'd make the current energy price problems worse.<p>But even <i>if</i> the USD did liquidate enough Euros to shift the dynamics, and <i>if</i> this was decided to be a bad thing, the Eurozone countries hold way more US treasuries than Japan, and could just sell those if they wanted to, which could quickly bring things back into balance, and would be a major deterrent against the US.
> unilaterally converting some already sold bonds to '100 year bonds'<p>Is this even legal? I mean, is this possibility stated in some terms and conditions that one must accept when purchasing a bond?
FX interventions are nothing new and 3% isn't nothing but it's not <i>that</i> much. The sun will rise in the morning, nbd.
This has to be the first time I've seen a graph with an inverted scale.
Doesn't mention that the Japanese would have sold US govt bonds to prop up the yen. But selling euros might force the Europeans to do just that to pro up the euro if need be. Is that a reasonable reading of things?
Euro countries hold even more US bonds than Japan does, and could sell those if they need to.<p>But the EU probably wont do that for monetary reasons. First, the EU doesnt really mind too much if the Euro drops in value a bit since it somewhat helps domestic industry. Second, the Euro seems to have <i>strengthed</i> against the dollar, not weakened since this was done.<p>I think if there was a coordinated selling off of US treasuries by Euro countries, it'd be to force a political concession from the USA, not to defend the Euro's value.
I don’t think the ECB would intervene, a lower euro is not a panacea but helps local industry compete with Chinese industry.
Not to repeat myself, but I'll point to earlier comments about what's going on with interest rates [1].<p>For some context here, it's worth mentioning the Yen carry trade [2]. This is actually relevant because it allegedly underpins the AI investment boom [3] and the Yen appreciating is a real problem for investors who borrowed Yen to invest, particularly if it's into a bubble that may well pop. It's a double shammy.<p>I'm wondering if this is going to be another George Soros moment. Soros famously broke the Bank of England who were trying to maintain a rate for the pound [4]. If massive AI investment is fueled on the Yen then there's a pretty big icentive to break the Yen by investors. This administration would normally be on board with that sort of thing (and actively profit from it) so it's not yet clear to me what's going on.<p>[1]: <a href="https://news.ycombinator.com/item?id=49119122">https://news.ycombinator.com/item?id=49119122</a><p>[2]: <a href="https://www.economicshelp.org/blog/glossary/yen-carry-trade/" rel="nofollow">https://www.economicshelp.org/blog/glossary/yen-carry-trade/</a><p>[3]: <a href="https://www.businessinsider.com/yen-carry-trade-unwind-stock-market-risk-boj-rates-2026-7" rel="nofollow">https://www.businessinsider.com/yen-carry-trade-unwind-stock...</a><p>[4]: <a href="https://www.investopedia.com/ask/answers/08/george-soros-bank-of-england.asp" rel="nofollow">https://www.investopedia.com/ask/answers/08/george-soros-ban...</a>
[dead]
[dead]
Paywalled
Surely this is american first at it's finest and will make America great again. Propping up the yen will certainly make my groceries more affordable and rent less onerous