The Guardian view on Japan’s yen: Trump wants to keep the easy-money machine running | Editorial
Summary
The US and Japan recently worked together to stabilize the Japanese yen, which had fallen sharply against the US dollar. This effort aims to keep the flow of cheap Japanese money used by investors to buy US assets, especially in technology, without causing market chaos.Key Facts
- The yen has fallen close to 160 yen per US dollar, near a 40-year low.
- The Trump administration intervened to help stabilize the yen by selling euros and buying yen.
- Japan’s low-interest-rate policies provide cheap money for global investors, who borrow yen to invest in higher-return US markets.
- This “carry trade” supports investments in US stocks, including in technology and artificial intelligence.
- A stronger yen or sharply rising Japanese interest rates could disrupt this cycle and force big sales of US assets.
- Japan holds about $1.1 trillion in US Treasury securities, which it might sell to support the yen but doing so would raise US interest costs.
- US Treasury Secretary Scott Bessent has enabled Japan to borrow dollars against its US Treasury holdings to buy yen, using Federal Reserve lending tools.
- The Fed is considering raising limits on these lending facilities to provide more support.
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