Summary

• A key irritant in Japan’s trade relations with the US has been its very weak currency. That weakness has been an important factor underlying Japan having one of the world’s largest external current account surpluses.
• Over the past two months, with the endorsement of US Treasury Secretary Scott Bessent, Japan’s Ministry of Finance has engaged in large-scale foreign exchange intervention to the tune of $70 billion to prop up the currency.
• Yet, unsurprisingly, this intervention has failed to move the needle very much. After briefly rallying to 156 yen to the dollar, the yen has again slumped to over 161 to the dollar.
• At the same time, long-term Japanese bond yields have increased to decade-long highs as underlined by the 30-year Japanese bond yield approaching 4 percent.

Originally published on June 24, 2026

Einstein famously remarked that a sign of insanity was repeating the same experiment and expecting a different result. If ever this statement had salience, it has to be in the