美国财政部干预汇市支撑日元

On Friday, days after US Treasury Secretary Scott Bessant said it looked quote very undervalued and just hours after Reuters snapped this photo of his to-do list at a cabinet meeting, the US Treasury intervened in the foreign currency market to support Japan's currency, the yen. So, in this video, we're going to try to figure out why the US bailed out Japan and explain why it could backfire. Which country has the world's best flag?

It's not an important question, certainly not as important as the topic of this video, but we still want an answer. So, we set up a survey that lets you vote for your favorite flag in a bunch of random matchups. It's actually really fun. Voting closes this Friday and is linked in the description. So, to understand this story, you need to know a bit about the Japanese economy. In short, the yen has been declining pretty steadily for the past couple of years, having traded at about 110 to the dollar for most of the late 2010s.

In 2022, it suddenly slipped to more like 150, where it then hovered for the next couple of years, with the Japanese government intervening to make sure it never really fell below 160. In other words, using their foreign exchange reserves to buy up yen on the currency markets, thus making it stronger. However, a couple of weeks ago, after months of downwards pressure and a series of expensive, but ultimately futile interventions, the yen finally slipped past 160, reaching a low of about 164 last week.

Now, to be totally honest, no one seems to have a wholly satisfactory explanation for why the yen is doing so badly. But it probably has something to do with the fact that inflation has been running pretty hot in Japan since really 2022, which is when we saw that first deep decline. Inflation obviously erodess the real value of the yen, which has undermined its appeal as a so-called safe haven. The usual remedy to persistent inflation and a weak currency is higher interest rates.

This is because higher interest rates encourage saving, which means less money slloshing around and should thus mean lower inflation. Relatedly, higher interest rates also make it more attractive to save in that currency, which should make it stronger. Unfortunately, raising interest rates is difficult for Japan because higher interest rates usually push up government borrowing costs. This is because higher interest rates encourage people to hold their money in savings accounts instead of buying government bonds, which is the other obvious choice for risk averse investors.

This isn't usually an insurmountable problem, but it's more difficult in Japan because the Japanese government has a massive debt burden. This means that any increase in interest rates would dramatically push up debt servicing costs. In other words, the cost of paying off the interest on outstanding debt, which is especially difficult when Japanese bond yields are already surging and the current Japanese government has signaled its intention to spend lots o