It has been pointed out that the recent Japan-US coordinated intervention was not about halting yen depreciation, but rather stemmed from US interests in preventing Japan from selling US Treasuries. Japan holds roughly 1.1 trillion dollars in US government debt, and if it continued to intervene alone, selling those holdings to raise funds could push up US yields and burden domestic borrowers. In a statement, US Treasury Secretary Bessent proposed expanding the FIMA Repo Facility, hinting at a mechanism where Japan could pledge its Treasuries as collateral to the Federal Reserve instead of selling them in the open market. The intervention is merely a stopgap, and to truly arrest the yen's decline, reinforcing monetary policy through additional rate hikes by the Bank of Japan is essential, but it is seen as difficult to raise rates freely due to US intentions and the impact on stock prices. As a shadow liquidity provider supporting the dollar system, Japan cannot allow a complete collapse as long as the yen functions as a policy tool, yet the structure persists where it lacks genuine monetary sovereignty.
Article suggests BOJ rate hikes are constrained by US interests, limiting yield increases.
