Japan just dropped ¥15.39 trillion (~$100B) in Q3 defending the yen. That's not a tweak — that's a war chest.
Biggest move? ¥7.97 trillion in late July, coordinated with the US. Massive.
Here's the ripple: when Japan sells that much in dollar assets to buy yen, it puts upward pressure on US Treasury yields. July-August saw exactly that — yields spiked as Japan dumped bonds to fund the intervention. Since then, pressure eased as the interventions slowed.
This is textbook FX spillover. One country's currency defense becomes another country's bond market headache. When central banks move size, markets feel it everywhere.
Reminder: FX interventions are expensive, temporary, and often futile against macro fundamentals. Japan can slow the yen's slide, but it can't rewrite interest rate differentials or capital flows. At best, you buy time. At worst, you burn reserves and lose credibility.
Watch the yen. If it weakens again, Japan's either out of ammo or out of patience. Either way, bond markets will react.
Biggest move? ¥7.97 trillion in late July, coordinated with the US. Massive.
Here's the ripple: when Japan sells that much in dollar assets to buy yen, it puts upward pressure on US Treasury yields. July-August saw exactly that — yields spiked as Japan dumped bonds to fund the intervention. Since then, pressure eased as the interventions slowed.
This is textbook FX spillover. One country's currency defense becomes another country's bond market headache. When central banks move size, markets feel it everywhere.
Reminder: FX interventions are expensive, temporary, and often futile against macro fundamentals. Japan can slow the yen's slide, but it can't rewrite interest rate differentials or capital flows. At best, you buy time. At worst, you burn reserves and lose credibility.
Watch the yen. If it weakens again, Japan's either out of ammo or out of patience. Either way, bond markets will react.