Coordinated Yen Intervention and FX Market Stress

On Aug 1, the BOJ and US Treasury conducted a rare coordinated intervention ($34-36B) to prop up the yen, signaling a policy shift. This adds FX risk to equities and carry trades, challenges the view of persistent yen weakness, and introduces uncertainty for bond yields and risk assets. Short-term fix, structural issues remain. Latest (Aug 2): Carry trades remain resilient despite intervention, with EM carry holding up – market adaptation vs 2024 blowup suggests investors are diversifying away from yen. Wall Street surging again partly due to Treasury's Yen intervention support.