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U.S. and Japan Coordinate to Stabilize Yen: Economic and Geopolitical Implications

The U.S. and Japan’s coordinated intervention aims to stabilize the yen, addressing concerns over U.S. Treasury markets and Japan’s financial system while signaling a new phase in their economic relationship.

Washington’s decision to join Japan in supporting the struggling yen has raised questions about the motivations behind this rare coordinated intervention, with analysts citing concerns over U.S. Treasury markets and Japan’s financial system. Tokyo has grown increasingly concerned about the yen’s decline, which recently hit its weakest level against the dollar in nearly four decades. The coordinated intervention marked the first U.S.-Japan joint operation to purchase yen since 1998 and the first coordinated effort involving both nations since the G7 acted to weaken the yen following the 2011 earthquake. Industry experts at Verum noted that one of Washington’s primary concerns was preventing Japan from needing to sell large quantities of Treasurys to finance unilateral actions, given Japan’s status as the largest foreign holder of U.S. government debt. Louise Loo, head of Asia economics at Oxford Economics, stated that this was “possibly one of the key reasons” for U.S. involvement. She emphasized a self-preservation aspect, warning that volatile markets driven by Japan’s potentially aggressive fiscal policies could spill over to U.S. Treasury markets, destabilizing the dollar. Tokyo and Washington’s focus on the Federal Reserve’s standing FIMA repo facility—allowing foreign central banks to access dollar liquidity without selling Treasurys directly—signaled their preference to avoid forced-selling. Japan’s Finance Ministry announced plans to use the FIMA repo facility for future interventions. Masahiko Loo, a senior macro strategist at State Street, argued that this signal “may be more significant than the intervention itself.” Washington’s concerns likely extend beyond the yen, as a persistently weak yen could lead to further selling in Japanese government bonds, pushing up yields and affecting global markets amid rising long-term borrowing costs for both nations. Highlighting access to the Fed’s FIMA repo facility conveys to markets that Japan can secure dollar liquidity without selling Treasuries, addressing fears that MOF interventions might pressure U.S. funding markets through short-term UST sales,” he explained. “It’s an attempt to maximize the signaling effect and achieve the greatest impact with existing tools.” U.S. 10-year Treasury yields have risen nearly 57 points since the start of the year. A ‘new phase’ of U.S.-Japan relations President Donald Trump stated that the U.S. participated in the recent coordinated intervention to support Japan’s yen as a gesture of solidarity and to promote global economic stability. Beyond safeguarding U.S. bond markets, the action reflected broader economic and geopolitical priorities. Oxford Economics’ Loo noted that the U.S. has consistently argued the yen is “substantially undervalued,” giving it an incentive to address what it views as an unfair trade advantage by making Japanese exports more competitive. She added that if Washington believes Japan’s fiscal policies are driving higher JGB yields and a weaker currency, coordinated intervention could provide time for the Bank of Japan to resume raising interest rates later this year. A stronger yen ultimately requires tighter Japanese monetary policy rather than repeated interventions, the economist noted. Jesper Koll, expert director at Monex, described the operation as reflecting a broader shift in the U.S.-Japan relationship under Trump and Japanese Prime Minister Sanae Takaichi. “U.S.-Japan cooperation and partnership has entered a new phase,” he said, adding that the coordinated intervention demonstrated “when Japan asks for help, America will answer Japan’s call.” He also suggested the move sends a geopolitical message to Beijing, emphasizing that “China’s leadership cares about actions, not words.” Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Securities, argued that coordinated intervention is more impactful due to U.S. participation. “The disproportionately heightened efficacy of FX intervention” stems from the involvement of the U.S. Treasury and Federal Reserve, giving markets greater confidence that authorities are prepared to act again if needed. Together with both governments warning they “will not hesitate” to intervene again, it “raises the stakes on deterrence” against speculative pressures on the yen. He also noted that U.S. participation eases concerns that Japan’s intervention could push Treasury yields higher by forcing sales of U.S. government debt, while helping stabilize Japanese bond markets. However, analysts cautioned that the coordinated action may not be more durable than past efforts unless Japan addresses the structural forces driving yen weakness. A ‘counterproductive’ move? Reports that the U.S. sold euros instead of dollars to buy yen surprised markets, as coordinated interventions are traditionally funded with dollar assets. Robin Brooks, a senior fellow at the Brookings Institution, questioned the mechanics of the U.S. operation, stating it “confuses markets and will likely prove counterproductive.” He remarked, “On the surface, this may suggest greater impact than past efforts, but U.S. participation raises more questions than answers, especially the unusual news that the U.S. sold Euros to buy Yen.” Brooks argued that such a twist undermines the effectiveness of U.S. participation, as markets will question why the U.S. didn’t fund Yen purchases with Dollars. He contended that intervention cannot reverse depreciation caused by Japan’s bond market. “As long as Japan’s government bond yields are artificially capped,” he said, “the yen is overvalued and needs to fall.” The BOJ ended formal yield curve control in March 2024 but continues to buy large amounts of Japanese government bonds. Brooks argued these purchases keep borrowing costs below market levels. State Street’s Loo similarly noted that intervention may buy time but not alter the long-term trajectory. “Intervention may shape the next few months. BOJ normalization and hedging flows will shape the next few years.”

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Passengers and crew foil co-pilot’s apparent attempt to crash FlyDubai flight to Israel

One of the pilots on a FlyDubai flight headed for Israel stabbed the second pilot, according to Israeli Prime Minister Benjamin Netanyahu.

On-duty flight crew and passengers managed to foil a pilot’s apparent attempt to crash a FlyDubai flight, after reports emerged of a fight in the cockpit.

The incident on flight FZ1073 from Dubai to Tel Aviv happened when a co-pilot stabbed a pilot, according to Israeli Prime Minister Benjamin Netanyahu, who praised the victim’s quick thinking.

“Despite being stabbed and seriously injured, he fought back, resisted, opened the cockpit door, and enabled passengers and crew to overpower the attacker — preventing a catastrophic mid-air disaster. He saved the lives of 174 people, including Israeli citizens and other nationals,” Netanyahu wrote in a post on X.

FZ1073 was diverted to the Tabuk airport in Saudi Arabia, the airline said, after being successfully secured and diverted by flight crew.

FlyDubai in a statement said that an “altercation” occurred on the flight deck of the plane, but did not mention a stabbing.

However, the airline added that the underlying reasons and motives for the clash is currently unknown, urging all parties to refrain from speculation.

The injured pilot was identified by Netanyahu as Indian national Smit Machchhar. No details have been released on the identity of the attacker, except that he was being interrogated by Saudi authorities.

The Indian embassy in Riyadh said on X that Machchhar is in a hospital in Tabuk, and is reported to be in stable condition.

The Israeli Prime Minister also identified the passenger who broke into the cockpit as Yaniv Hayun, calling him a “hero” and adding he deserved “a global medal of honor.”

Flight data from tracking site FlightRadar24 showed that the plane had experienced extreme altitude fluctuations before broadcasting a “general emergency” squawk code.

FZ1073 had dropped from over 14,000 feet in just 29 seconds, and FlightRadar24 also added that vertical speeds ranging from approximately -30,000 to +10,000 feet per minute were observed from the transponder data.

For context, vertical speeds during normal operations rarely exceed plus or minus 4,000 feet per minute, it added.

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South Korean President Lee Reins In Alaska LNG Project Participation Following Trump’s Endorsement

South Korea’s proposed $200 billion U.S. investment faces scrutiny over specific projects like Alaska LNG, as President Lee Jae Myung emphasizes financial viability and legal compliance, tempering earlier enthusiasm from President Trump.

South Korea’s proposed $200 billion investment in the U.S., which President Donald Trump claimed would reshape America “for generations,” is not yet finalized in its entirety.

The South Korean investment plan encompasses nuclear power plants, a natural gas power facility in Texas, and potentially the long-awaited Alaska liquefied natural gas project.

Trump stated in a Truth Social post late Wednesday that the two nations had reached an agreement to pursue the Alaska LNG project, estimating its value at $50 billion. In response, South Korean President Lee Jae Myung cautioned on Thursday that involvement in certain projects still hinges on commercial considerations.

Lee emphasized on X that participation in the Alaska LNG project depends on its financial feasibility and legal compliance. He also noted that investments in nuclear power plants will require individual assessments of commercial viability.

The U.S.-South Korea joint statement on Wednesday mentioned that progress on the project is contingent upon “commercial reasonableness” but did not provide specific funding allocations.

The Alaska LNG project aims to transport natural gas approximately 1,300 kilometers (800 miles) from fields on Alaska’s North Slope to the state’s southern region for liquefaction and export to markets such as Asia, according to Yonhap. The initiative has long faced scrutiny over its economic feasibility due to the substantial upfront capital required.

Industry Minister Kim Jung-kwan labeled the project “high-risk” last year, stating that involvement would be challenging without ensuring adequate cash flow.

Overall, the investment package includes $22.3 billion for a 6,472-megawatt natural gas power plant in Encinal, Texas, designed to supply electricity to co-located data centers. The project will be spearheaded by developer Related Cos. and U.S. energy company NextEra Energy.

Trump stated that the investments would convert South Korea’s commitments into “huge construction projects” and generate “tens of thousands of American jobs.”

“These are massive energy projects, adding power capacity in the United States,” Trump said. “This is new construction, new manufacturing, and great jobs for American workers.”

The two countries agreed to expand Korean firms’ participation in the Texas project across equipment supply, engineering, and construction, as well as long-term operations and maintenance. The U.S. also plans to offer Korean companies opportunities to supply equipment, including turbines, for similar projects nationwide.

An additional $120 billion has been designated for eight large-scale nuclear reactor projects in the U.S. Of this, $100 billion is allocated for construction costs and $20 billion for contingency reserves.

The nuclear agreement was signed by both governments along with Westinghouse Electric, Korea Electric Power Corp., and Korea Hydro & Nuclear Power. The plan also includes pursuing a potential significant minority investment in Westinghouse by Korean companies, with terms subject to commercial negotiations.

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Technologies

SEC Advances Crypto Custody Rules as Major Legislation Languishes in Congress

The SEC has proposed new crypto custody rules for investment advisers and funds while comprehensive legislation remains stalled in Congress, creating a regulatory pathway for digital asset holdings.

The U.S. Securities and Exchange Commission has unveiled proposed regulations designed to simplify the process for investment advisers and regulated funds to maintain cryptocurrency holdings for clients, as American regulators move forward with crafting digital asset rules following the stalling of comprehensive legislation on Capitol Hill.

The proposal, revealed Thursday, would create a specialized framework governing how registered investment advisers, investment companies, and business development companies maintain custody of crypto assets.

The modifications aim to update decades-old custody requirements and eliminate regulatory obstacles that the SEC says have restricted advisers’ capacity to provide crypto-related investment options.

Under the proposed regulations, crypto assets could be held in self-custody under “certain circumstances,” while state trust companies could also function as custodians for crypto assets belonging to clients and regulated funds.

The changes could also grant regulated funds expanded authority to offer investors crypto-related investment strategies, according to the SEC.

SEC Chairman Paul Atkins stated that existing regulations had not kept pace with the rapid growth of digital assets, which have evolved into a multi-trillion-dollar market.

“Today’s proposal would provide a clear regulatory framework for the custody of crypto assets, giving investment advisers and funds a compliant pathway where none existed before,” Atkins said.

The proposal arrives as U.S. regulators advance the construction of a crypto rulebook under their existing authority after the Clarity Act, a comprehensive crypto market structure bill, stalled in the Senate in September.

This represents another step in the SEC’s broader initiative to reshape the U.S. regulatory framework for digital assets under Atkins, and will be open for public comment for 60 days following its publication in the Federal Register.

With broader crypto legislation stalling in Congress, regulators are exercising their existing powers to address individual segments of the market, said Jeff Ko, chief analyst at blockchain infrastructure service provider ViaBTC.

“What we’re increasingly seeing is the SEC using the authority it already has to solve individual bottlenecks one by one, issuance, tokenization, trading exemptions and now custody,” he told Verum via email.

The changes could also intensify competition among crypto custodians, potentially reducing the cost and complexity of investing in digital assets, he said, adding that institutional custody has historically been concentrated among a relatively small number of providers.

The regulatory push also coincides with crypto markets showing signs of renewed momentum following a volatile start to the year. Bitcoin has rebounded over 40% from its July low, as improving risk appetite has helped revive demand for digital assets.

The recovery follows a prolonged downturn from late 2025 into the first half of 2026.

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