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Why the U.S. stepped in after decades to prop up Japan’s yen — and what’s at stake

Washington’s decision to join Japan in supporting the battered yen has prompted questions over what motivated the rare coordinated intervention.

Washington’s decision to join Japan in supporting the battered yen has prompted questions over what motivated the rare coordinated intervention, with analysts pointing to concerns over U.S. Treasury markets and Japan’s financial system.

Tokyo has grown increasingly wary of the yen’s decline, which recently dropped to its weakest level against the dollar in nearly four decades. The yen

The coordinated intervention was the first U.S.-Japan joint operation to buy yen since 1998, and the first coordinated intervention involving the two countries since the G7 acted to weaken the yen after the 2011 earthquake.

Industry veterans told CNBC that one of Washington’s biggest concerns was avoiding a scenario where Japan would need to dump large quantities of Treasurys to finance unilateral intervention, given how the north Asian nation is the largest foreign holder of U.S. government debt.

Louise Loo, head of Asia economics at Oxford Economics, said that that was “possibly one of the key reasons” behind U.S. participation.

“There is a self-preservation element here. Volatile markets driven by potentially fiscally-aggressive policies from Japan could extend to the U.S. Treasury markets, destabilizing the dollar.”

Tokyo’s and Washington’s emphasis on the Federal Reserve’s standing FIMA repo facility — which allows foreign central banks to obtain dollar liquidity without selling Treasurys outright — “was a clue that they’d like to avoid forced-selling as much as possible,” she said.

Japan’s Finance Ministry said Monday it plans to use the FIMA repo facility for future interventions. Masahiko Loo, senior macro strategist at State Street, said the signal “may be bigger than the intervention itself.”

Washington’s concerns likely extend beyond the yen, he added. A persistently weak yen could trigger further selling in Japanese government bonds, with higher yields spilling over into global bond markets at a time when both Japan and the U.S. are grappling with rising long-term borrowing costs.

“Highlighting access to the Fed’s FIMA repo tells markets Japan can raise dollar liquidity without selling Treasuries … addressing concerns that MOF intervention could pressure U.S. funding markets through short-end UST sales,” he said. “It’s an attempt to maximize the signaling effect and get the biggest bang for the buck with the tools already available.”

Yields of the U.S. 10-year Treasury have gained almost 57 points since the start of the year.

A ‘new phase’ of U.S.-Japan relationship

President Donald Trump said that the U.S. had participated in last week’s coordinated intervention to help the yen as a gesture of support for Japan and in the interest of global economic stability.

Beyond protecting U.S. bond markets, the intervention also reflected Washington’s broader economic and geopolitical priorities.

Oxford Economics’ Loo noted the U.S. has repeatedly argued the yen is “substantially undervalued,” providing it an incentive in correcting what it sees as an unfair trade advantage as it makes Japanese exports more competitive.

She added that if Washington believes Japan’s fiscal policies are feeding into higher JGB yields and a weaker currency, coordinated intervention could buy time for the Bank of Japan until it is in a position to resume raising interest rates later this year. A stronger yen ultimately requires tighter Japanese monetary policy rather than repeated intervention, the economist noted.

Jesper Koll, expert director at Monex, said the operation reflected 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 coordinated intervention showed “when Japan asks for help America will answer Japan’s call.” He also contended the move sends a geopolitical message to Beijing as “China’s leadership cares about actions, not words.”

Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Securities, said coordinated intervention is inherently more powerful because of U.S. participation.

“The disproportionately heightened efficacy of FX intervention” comes from the involvement of the U.S. Treasury and Federal Reserve, giving markets greater reason to believe authorities are prepared to act again if necessary, he said. Together with both governments warning they “will not hesitate” to intervene again, it “ups the ante on deterrence” against speculative bets pressuring the yen.

He also contended 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.

Still, analysts warned that the coordinated action may prove no more durable than previous interventions unless Japan addresses the structural forces driving yen weakness.

A ‘counterproductive’ move?

Reports that the U.S. sold euros rather than dollars to buy yen surprised markets because coordinated intervention has traditionally been funded with dollar assets.

Robin Brooks, senior fellow at the Brookings Institution, questioned the mechanics of the U.S. operation, highlighting that it is “confusing markets and will prove counterproductive.”

“On the surface, that may give the impression that this intervention will be more impactful than past efforts, but U.S. participation raises more questions than answers, especially the very odd news that the US sold Euros to buy Yen.”

“This kind of twist in my opinion undercuts the efficacy of U.S. participation, because it invariably will have markets wondering why the U.S. didn’t just fund Yen buying out of Dollars.”

Brooks argued intervention ultimately cannot reverse depreciation driven 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 it has continued to buy large amounts of Japanese government bonds. Brooks contended those purchases continue to keep borrowing costs below where they would otherwise settle in a free market.

State Street’s Loo likewise highlighted that intervention can buy time, but not change 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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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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