The yen has erased the gains from the US Treasury's intervention, with carry traders rebuilding short positions and concern growing over Japan's spending. Senator Warren is pressing Bessent to justify the operation, Bloomberg reports.
Japan's currency policy and its interest rates sit in different hands: the government intervenes in the foreign exchange market, the Bank of Japan sets rates. A weak yen raises import costs at home and sustains the carry trade, in which investors borrow cheaply in yen to buy higher-yielding assets abroad.
The yen has given back the gains it made after the US Treasury intervened to support it, with concern mounting over the direction of Japan's spending, the New York Times reported on Friday. Bloomberg reports that carry traders are using the intervention to rebuild short positions and that Senator Warren has written to Bessent asking him to justify the operation.
Bloomberg reports that Japan's government supports faster rate increases by the Bank of Japan, following joint intervention with Washington to prop up the yen. The Economist writes that buying yen unwinds a dangerous trade, while Bloomberg describes domestic inflation as creating winners and losers.