The first joint intervention between the United States and Japan since 1998 was finally executed to prop up the yen, which fell to a level of 164 per dollar, the worst depreciation in 40 years. The Bank of Japan is estimated to have spent up to $36.6 billion to buy back its own currency. On the other hand, the New York Fed also entered the market to sell euros, not dollars, on behalf of the US Treasury by relying on the Exchange Stabilization Fund. The results were immediately visible: the yen bounced to 157.57 at Friday’s close and stabilized back around 157 at the start of Monday’s trading.
Amid the foreign exchange shock in these two developed nations, Bitcoin proved its resilience. The largest crypto asset held firm at $63,600, recording a 1.8% gain over the last 24 hours. Throughout the Asian session, Bitcoin’s price steadily held at $63,800 and absorbed selling pressure without any significant pullback, ignoring the uneven performance of regional equities in the continent. Meanwhile, global oil prices also rose amid mixed signals from negotiations between the US and Iran.
Help That Did Not Come Suddenly
The cooperation between the two countries had been planned beforehand. US Treasury Secretary Scott Bessent held a meeting with Bank of Japan Governor Kazuo Ueda on the sidelines of the G20 agenda in late August in North Carolina. During the meeting, Bessent pushed for the expansion of the FIMA Repo facility, a key Federal Reserve mechanism for lending dollars to foreign institutions using US government debt as collateral. The expansion of this channel is positive news for the availability of global dollar liquidity.
Economist Mohamed El-Erian highlighted the vulnerable position in this scenario. The US is now positioning itself in a strategy whose success is no longer in its own hands, but depends entirely on the coordination of policymakers in Tokyo. Furthermore, the size of the US contribution to this market intervention effort has not yet been disclosed to the public.
The Hidden Threat of Capital Withdrawal
Signals that Japan’s low-interest rate era is ending are growing clearer on the trading boards. The yield on two-year Japanese government bonds rose to cross the 1.57% mark on Monday. Despite this, the interest rate gap between the Federal Reserve at 3.50-3.75% and the BOJ’s rate of 1% remains sufficient to support the continuation of carry trade practices.
For Bitget Wallet COO Alvin Kan, this multi-billion dollar intervention functions more as an emergency brake during market chaos rather than the start of a sustainable yen recovery. The long-term danger lurks in the risk of unwinding the carry trade. If Japanese investors rush to repatriate their capital, global financial liquidity could be sucked dry. Ultimately, this shrinking money supply will pressure the movement of all risk asset classes, and Bitcoin will inevitably have to prepare for the spillover effects.
As reported by Cointelegraph.
Disclaimer: This article is for informational and educational purposes only, not financial advice. Cryptocurrency assets are highly volatile and carry significant risk. Always do your own research (DYOR) and never invest more than you can afford to lose.
