US-Japan yen intervention: Saving the yen or protecting US Treasuries?

In late July, the United States and Japan conducted a rare coordinated intervention to support the yen. Japan confirmed on Monday that both sides will not hesitate to conduct further coordinated interventions.

The core issue is that Japan holds about $1.14 trillion in US Treasuries. If Japan were forced to sell part of those holdings to finance further currency intervention, it could push up Treasury yields and unsettle US financial markets.

Washington's answer is the FIMA Repo Facility, which allows Japan to use its Treasury holdings as collateral to obtain US dollar funding from the Federal Reserve without selling the bonds on the open market.

Markets generally view the intervention as buying time rather than reversing the yen's long-term weakness, which will ultimately depend on Japan's own fiscal and monetary policy adjustments.

Huang Qi contributed to this story.