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  • Hacker News
  • 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.
    by raincole
  • Not to repeat myself, but I'll point to earlier comments about what's going on with interest rates [1].

    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.

    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.

    [1]: https://news.ycombinator.com/item?id=49119122

    [2]: https://www.economicshelp.org/blog/glossary/yen-carry-trade/

    [3]: https://www.businessinsider.com/yen-carry-trade-unwind-stock...

    [4]: https://www.investopedia.com/ask/answers/08/george-soros-ban...

    by jmyeet
  • Good reminder that exactly this time last year we had a big blow up that was short lived and blamed on the yen carry trade.
    by adabyron
  • OK, let me restate that, since I had to think about it for a bit to see what you were getting at:

    The yen carry trade is when you borrow yen (at ~0% interest), convert to dollars, buy assets in dollars, those assets hopefully appreciate, but they don't have to appreciate all that much because you were able to buy them on leverage with no interest.

    But the other way to win on that trade is if the yen becomes cheaper while you were holding dollar-based assets. So those who are currently in the carry trade (that is, have borrowed yen) would not mind if the yen suddenly became dramatically cheaper.

    I think that's a longer form of what the parent is saying.

    by AnimalMuppet
  • This has to be the first time I've seen a graph with an inverted scale.
    by olalonde
  • Yeah… what was the point of that?
    by braingravy
  • 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?
    by horsey_face
  • I don’t think the ECB would intervene, a lower euro is not a panacea but helps local industry compete with Chinese industry.
    by jurgenburgen
  • Euro countries hold even more US bonds than Japan does, and could sell those if they need to.

    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 strengthed against the dollar, not weakened since this was done.

    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.

    by eigenspace
  • Can anyone steel man the “this isn’t a big deal” side of this?

    On x and reddit all I see are sky is falling posts.

    by bilsbie
  • The sky has been falling for the Yen for about thirty years now. At this point it feels like the boy who cried wolf.
    by bryanlarsen
  • 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).

    It's unusual, but not earth shattering or crazy.

    ____________________

    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.

    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.

    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').

    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.

    by eigenspace
  • To see the steelman position explained properly, I would suggest to follow macro guy Luke Gromen both on twitter and on YouTube.
    by worldthruword
  • FX interventions are nothing new and 3% isn't nothing but it's not that much. The sun will rise in the morning, nbd.
    by fragmede
  • That "historic" characterization has a smell of sports statistics. Yeah, that player never scored a goal in a Friday when it's a full Moon on the team's home stadium; no, that's meaningless.

    The Japanese economy is changing, but that's true for any economy at any time. The world is currently in a crisis that is testing international relations, but I hope you knew that already. This one intervention doesn't add much by itself.

    by marcosdumay
  • Here’s the likely rationale from one of the FT comments:

    “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.

    […]

    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”

    —-

    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.

    by sph
  • 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 https://a.co/d/0aTW4L6D
    by sputknick
  • Hold on there. The reason you mostly see sky is falling posts is that those get more engagement, both positive and negative. "Everything is fine" doesn't cause a reaction in a reader.

    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.

    by Schiendelman
  • Japan is the sort of canary in the coal mine.

    so yeah if the yen pops - then the u.s will too given all the 'a.i' shenanigans & the market manipulation with oil.

    but I guess the US Treasurer is willing to manipulate the market till they can't.

    by dzonga
  • If you can manipulate the market why not do it?

    Literally no one benefits from the alternative.

    by deadbabe
  • 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.
    by halJordan
  • at some point, the SPR runs dry
    by aorloff
  • Can you elaborate?
    by dartharva
  • 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.
    by heisenbit
  • US is only buying because Japan put out a mandate to repatriate all global Yen, so Japan has been selling off US notes to do just that.
    by downrightmike
  • 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).

    One can make a reasonable story that this led to the SVB collapse.

    by timr
  • Wait, no way!

    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

    by CamelCaseName
  • 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.
    by Aboutplants
  • 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.
    by IAmGraydon
  • It was US Treasury Secretary Scott Bessent

    https://www.reuters.com/world/asia-pacific/bessents-to-do-li...

    by dr_coffee