There has never been a currency intervention in history that has worked. 
Yen Gains on Intervention
Bloomberg reports Yen Gains on Intervention, Reports of Buying By Both US, Japan
- US and Japanese authorities extended efforts to shore up the yen on Friday, with the currency strengthening more than 1% against both the dollar and the euro.
- Japanese authorities bought yen and sold dollars during New York trading on Friday, and the US Treasury Department reportedly sold euros to buy yen on behalf of the US Treasury Department.
- The moves by Japanese and US officials speak to a coordinated pushback against the depreciation of the yen, which last week touched its weakest level since 1986.
- The FT said this marked the first joint intervention by the Washington and Tokyo to prop up the Japanese currency in nearly 30 years.
Largest Intervention in History
Japan just conducted its biggest one-day currency INTERVENTION EVER:
Japan deployed an estimated $53 billion, or ¥8.45 trillion, to defend the yen on Thursday, likely the largest single-day currency intervention on record, according to a Bloomberg analysis of Bank of Japan accounts.
The move came as the yen surged as much as +3.3% against the US Dollar, its biggest intraday gain since December 2023.
The intervention followed a rate check from US authorities around 2:30am Tokyo time and coincided with South Korea also stepping into currency markets to support the won, which strengthened to its highest level since mid-October.
By comparison, Japan’s previous record intervention totaled ¥11.73 trillion, or roughly $74 billion, over an entire month during April’s Golden Week holiday.
What’s Going On?
Mugalli Comments
The US govt intervening directly in the yen market isn’t the typical “bilateral cooperation” imo. It’s a de facto bailout of the BOJ’s broken FX framework.
Japan’s central bank trapped itself between runaway imported inflation and an unserviceable sovereign debt load. To stop Japan from dumping long dated U.S. Treasuries to defend the currency, spiking our own 30 year yield to 5.24% which has been the case all week. T[he] U.S. Treasury is stepping in to manage the exchange rate for them.
Two Key Observations
- Japan’s central bank trapped itself between runaway imported inflation and an unserviceable sovereign debt load.
- To stop Japan from [selling] U.S. Treasuries to defend the yen (spiking US treasury yields) the U.S. Treasury is stepping in to manage the exchange rate for them.
Point one seems obvious. Point two is the more interesting one.
The only time foreign nations “dump the dollar” is to prop up their own currencies.
Every dollar dumping episode is a sign of US dollar strength, not weakness or avoidance.
My point number two is a more generalized statement than what Mugalli stated.
It’s unclear if Japan was about to dump long-dated treasuries. But the general idea is to sell treasuries and use the dollars to buy the Yen hoping to stop the decline.
Doomed to Fail
Q: Why?
A: Because it fixes no fundamental problems.
What About the Plaza Accord?
The Plaza Accord was a 1985 agreement by five major nations to weaken the U.S. dollar, reduce trade deficits, and coordinate currency market intervention. It was signed on September 22, 1985, at the Plaza Hotel in New York City by the G5 countries: the United States, Japan, West Germany, France, and the United Kingdom.
Plaza Accord Details
- Currency Shifts: The U.S. dollar fell sharply over the next two years, dropping more than 25% against major foreign currencies.
- Trade Balance: Successfully lowered the U.S. trade deficit with European nations, though it was less effective at immediately resolving imbalances with Japan.
- Japan’s Economy: The soaring yen hurt Japanese exports, prompting aggressive domestic monetary easing that helped fuel Japan’s massive asset price bubble in the late 1980s and its subsequent “Lost Decade” of stagnation.
- Successor Agreement: Succeeded by the Louvre Accord in 1987, which aimed to stabilize falling currency values and halt the dollar’s rapid decline
Some might believe the Plaza Accord agreement worked. But that’s false.
The dollar had already started to weaken. The Plaza accord happened right as the dollar trend reversed anyway.
The irony was the new Louvre Accord to stop the dollar slide.
What’s Japan to Do
If Japan wants to halt the slide of the Yen then it needs to raise interest rates or take other actions to make the yen more attractive.
But Japan does not want to hike rates fearing a recession.
Yen Intervention Is Actually Counterproductive
Q: Why?
A: Instead of having US dollar reserves it wasted them, weakening the yen over the long haul.
Think of it this way. What if Japan sold all its dollars and gold to buy yen?
How would that help Japan at all?
It wouldn’t. No reserves would make matters worse.
Clarification
I inadvertently left off the word “selling” in point number two above.
To stop Japan from [selling] U.S. Treasuries to defend the yen (spiking US treasury yields) the U.S. Treasury is stepping in to manage the exchange rate for them.
The US Dollar took a hit Thursday and Friday. The E-waves count since the 2022 high looks like a triangle correction. The finer details of being in sub wave d or e is debatable, so sit tight while the markets make a clear signal. After the triangle completes in the 93-95 price range, there is a big move that takes prices above 115.
Japan isn’t selling her currency reserves proper, rather selling US treasuries to buy yen, which is why Bessent is worried.
I’m told this admin. is rife with insider trading via prediction markets. I’m sure Treasury, the CFTC, FBI, and DOJ will be all over it! (All over it, in the sense of cashing in their tickets.)
I’m remembering the insider-outsider guy who was the romantic partner of an Enron top guy.
What if the secular trend for bond rates the next 40 years is higher ?
Because the underlying cash flow just can’t support all the financial instruments levered on top of it.
Good question. I’d imagine if your postulation is correct, we’d see a lot more of these efforts by the central banks.
Like, all over the place.
The 60 year cycle in 10 year US bond yields bottomed in 2020. The cycle is best measured peak to peak. So there is another ~14 years of upside remaining in the long term trend. There will be a relief pullback at some time since since financial market never make a straight line for long periods of time.
Higher oil prices from Trump’s wars impinges on heavy importer Japan disproportionately. Immediately translating into consumer price inflation and pressuring the BoJ to raise rates. Is this maybe even the prime driver of the recent strong correlation between oil prices and long-term interest rates?
What the US is doing is money-printing in a different form, a dishonest move which obscures real values.
I suspect $130 oil could be the long-awaited trigger to unwind the Yen carry trade in a hurry.
The Yen carry trade started unwinding almost exactly two years ago because the Bank of Japan raised rates a whopping, gigantic 0.25%. That tells you how fragile that market is.
Also Japan has the second highest debt to GDP ratio in the entire world @237%.
The worst is Sudan @272%. C’mon Japan! Surely you can take the lead from those guys! #winning
I like John Mauldin’s quip, “Japan is a bug in search of a windshield.”
“The Yen carry trade started unwinding almost exactly two years ago…”
With Japanese rates still so much cheaper than US rates, it isn’t obvious or likely that it has substantially unwound. Does anyone point to any effort to measure it, by proxy or anything? I feel like this is a powerful distortion of the market that must be paid for yet.
I’m not sure why they are bothering to intervene. Back in the 1980s USD/JPY was 250. In the 1970s 300. And I hear the new prime minister wants a cheap yen.
Quite frankly, if they want to cool off their economy they should have a recession.
Once upon a time there was this thing called a business cycle. Doesn’t seem to exist anymore.
The Fed did this to protect treasury bonds, for, hadn’t it, Japan would sell dollars from the proceeds of selling bonds to prop up the yen.
In the new America first golden age, everyone but Americans is entitled to billions of dollars in free money. This is exactly what you voted for when you voted for an America first president!
I said a few days ago that the world economic collapse would begin in Asia and that Japan being the last major sovereign to raise rates was a canary in the coal mine.
Well the Yen carry trade has gone south and here is more proof that things are coming to head. Japan central bank and The Fed have painted themselves in similar corners and there is no way out that will not cause major suffering. The only real difference is that the dollar is still the world’s reserve currency and that is eroding away.
Interesting times.
he’s our empire’s nero and caligula and napoleon and yes the funny one with the little mustache…………all twisted and war mongering madmen. maybe we could invade russia next winter with a million ground troops.
Another Key Observation:
Verbs are helpful. Perhaps “selling”?
”To stop Japan from U.S. Treasuries to defend the yen (spiking US treasury yields) the U.S. Treasury is stepping in to manage the exchange rate for them.”
Yes.
To stop Japan from [selling] U.S. Treasuries to defend the yen (spiking US treasury yields) the U.S. Treasury is stepping in to manage the exchange rate for them.
BUILDING A BALLROOM WILL FIX EVERYTHING
You forgot the Victory Arch.
i love the fact that our nero is leaving behind such wonderful edifices around the capitol. gonna give me a hearty LOL when i go back there to visit. i just hope they invite me to the ballroom after the empire has crumbled and we resemble the other lost empires on planet. london to moscow to madrid and paris. i hail from new amsterdam. some call it hym** town. hat tip jesse jackson.
Cause we’ve got the biggest
Balls of them all!
like in idiocracy, i’m in a league of “aw my balls”.
Meanwhile, taking a reflecting pool respite, the mean and stupid case against the Olympic canoeist was 100% stronger than the mean and stupid case against Fauci.
Huh?
I despise both “parties.” But Fauci is a lying bag of s**t. He early on suppressed any suggestion that COVID came from a lab. To cover his own a*s because he was intimately involved in sending gain-of-function research to a Chinese lab after it been shutdown as unsafe in the US by Obama (who I also despise).
And I’m the queen of old Siam.
Where do you nutjobs find this nonsense?
Where do you nutjobs find this nonsense?
Well, you could start by informing yourself.
https://www.science.org/content/article/house-panel-concludes-covid-19-pandemic-came-lab-leak
False.
Mish is right. The proer solution to this is for the Japanese CB to raise interest rates. But they can’t because of Japan’s massive sovereign debt. This is the path of the US too. Only we don’t have a bigger country who would be willing to help stabilize our currency.
I was involved in FX derivatives in the 80s. Purchasing Power Parity plays a part in helping reverse overshoot of flows, with real assets increasingly attractive to outsiders when currency relative values get too cheap. Real Estate in the UK was heavily purchased when the BP was 1.15-20. at that time.
What is ignored in this article is the growing trend of replacing $US reserves with gold by many CBs he past few years. The US deficit and debt are not sustainable. The higher interest rates divert spending on current needs to paying interest on debt. The Fed is buying increasing % of issues, Japan is not alone!
Look at a 50 year chart of the $US vs basket. (Index) It is a slow decline with lower highs and lower lows. Empires aren’t forever, and it is likely that the US has seen its peak. Diversification is wise.
The collapse is inevitable and 100% unavoidable at this point,
Prior to Covid there was a chance…but between Trump I, Biden and now Trump II the die is cast…there is no going back.
Decline will be slow at first (we are currently living through it), then “muy rapido.”
Some good books out there on the day-to-day in Weimar Germany during the currency implosion — we’ll see the same here — anyone too old to work or relying on pensions, social security or savings will be destroyed with a high likelihood of starving to death.
But the silver lining — Israel will be fine.
Great….we all move to Israel.
Besides fiat money and extreme debt levels which have become widespread addictions amongst most developed countries, there is an underlying depletion of Natural ‘wealth.’ Fossil fuels abetted an 800% increase in population in 8 generations (2C). Technology leveraged harvesting of minerals, fish stocks, etc. Biodiversity incl. pollinators is declining. Aquifers and clean surface waters ditto. Waste sink overloads have increased toxification in air/water/soils/food chain…No amount of money, gold, crypto…can purchase what isn’t available; nor can it reverse the toxins.
An expert traditional economist (former chief market strategist at brokers’ broker Tulett Prebon) who focuses on energy is worth a look: https://surplusenergyeconomics.wordpress.com/2026/07/01/327-surplus-energy-economics/
You can say that again.
The biggest threat to stability is the thrashing of environment due to population boom in both numbers and per capita consumption, the climate change meme being just a popular catch-all phrase.
The debt-out-the-wazoo is a the natural consequence of the political system of no accountability.
Silvet lining? Israel is the entire point. The whole world could burn flat to the ground, as long as Israel is untouched.
Having contributed mightily to the bankruptcy and decline of the US Empire–and at the same time having bullied everyone in the Middle East and by the Gaza genocide exhibited their nature to the world–without the US taxpayer, Israel will not be fine.
i’m old like you. i remember when a 100 benjamin was baller money. now it’s bupkiss only good for trinkets.
Looking at the 50 year DXY chart is giving the dollar more credit than deserved as the chart is comparing currencies that are all fiat and all losing purchasing power rapidly. For a more realistic look at the dollar decline, look at a 50 year inverse gold chart priced in dollars. You get the same story looking at an inverse 50 year gold priced in yen chart.
gold to dow ratio chart is my favorite chart of all time.
Also good, and applies to other fiat almost as well. The buck has a significant decline awaiting in my opinion,maybe 25% vs a basket. So I own non-$ Sovereign 1-3 yr notes via BWZ, and a lesser amount via WIP (World Inflation Protected) longer dated bonds as well as physical metals (CEF) held by Sprott and audited by Canada.
“Gold as reserves is rising almost entirely due to price change not central bank buying”
This is interesting and a great topic for an article.
I assumed that central banks own more tons of gold today than they did, let’s say five years ago. You are saying they are just watching their existing reserves go up in price?
I was referring to many global CBs, mainly China! Not Japan.
Charts and tables I have seen report increase in gold reserves in ounces (millions) not dollars. With a roughly 20% decline in gold price, gold reserve dollar amount would probably be down so far this year.
https://theconversation.com/central-bank-gold-holdings-are-at-a-50-year-high-whats-behind-the-jump-in-reserves-284689
“Gold as reserves is rising almost entirely due to price change not central bank buying.”
Actually it is both price change and purchases.
Central banks have purchased a net total of 345 metric tons of gold during the first half of 2026. 89% of CB survey respondents stated they expect global official gold reserves to continue rising over the next year.
https://www.gold.org/goldhub/research/central-bank-gold-reserves-survey-2026
Somebody is making piles of money right now.
My first (untutored) impulse is to see cracks in the Western superstructure. Germany next? Other Asian dominoes?
Let’s see how an energy spike superimposed on all this goes for Japan.
It’s not me….true story.
Mish, how is yen carry trade linked to this? Here we are talking about at least $ 1 trillion of principal.
Well, if there is a man on the planet that knows about currency manipulation it would be one of lead guys on Soros’s team during the 1992 Bank of England Exchange Rate Mechanism (ERM) crisis….Scott Bessent. Wonder what he’s up to these days?
The key figures generally recognized are:
I have serious doubts about Bessent. He sounds like an idiot when talking. Is it because he is clueless or because he goes though contortions to support Trump.
Agree. He does sound like an idiot, stumbling over his words, looking very uncomfortable, making nonsensical claims. It’s clear he doesn’t believe a word he is saying. Very unnatural.
Meanwhile Hassett is a smooth talker, smiling at the camera and speaking with a sense of assurance. Too bad it’s all garbage and lies.
He does have a speech impediment, probably doesn’t help
But maybe he’s like many “Wall Street savants”… “all hat no cattle” or more like “right place right time”…or as we referred to them: “the Face Men”