# Why a Weak Yen Is America’s Problem

An episode of [Big Take](https://invisiblenetwork.ai/podcast/1578096201), 4 Aug 2026, 18 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/825d4e29-b616-46f4-afd7-ae2b0013005c/96760781-35d6-4610-a989-b49c01387f87/audio.mp3?utm_source=Podcast&in_playlist=8b1dd624-a026-43e9-8b57-ae2b00130066

As the Japanese yen hit a 40-year low against the US dollar, Japan's government stepped in to support its currency. And it has a powerful ally in US President Donald Trump, who is putting the US financial might behind the historic currency intervention in what he called a “signal of friendship.” On today’s Big Take Asia podcast, host K. Oanh Ha sits down with chief Asia foreign exchange correspondent Ruth Carson to unpack how the yen fell so far, what it could take to get it back on track and what’s at stake for the global economy. Read more: Bessent Says Yen Level Problem for Japan, Other Currencies Further listening: • Carry Trades, Explained • Could the Chinese Yuan Ever Replace the US Dollar? We have a special Bloomberg subscription offer for podcast listeners at Bloomberg.com/podcastoffer. Hosted by K. Oanh Ha; Produced by Naomi Ng, Yang Yang, Rachael Lewis-Krisky and Victor Swezey; Reported by Ruth Carson; Edited by Paddy Hirsch and Tracey Samuelson. Fact-checking by Victor Swezey; Engineering by Emma Munger and Taka Yasuzawa. Senior Producer: Naomi Shavin; Deputy Executive Producer: Julia Weaver. Executive Producer: Nicole Beemsterboer. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
[0:09] Speaker 2: Investors are watching the currency markets with bated breath this
[0:13] Speaker 2: week as a historic high stakes intervention by the US
[0:16] Speaker 2: and Japanese governments send shock waves through the global financial system.
[0:22] Speaker 2: At the center of the storm, the Japanese yen. The
[0:25] Speaker 2: quick look at the end as Japan and the US
[0:27] Speaker 2: warned of the coordinated action and intervention.
[0:30] Speaker 1: The US and Japan warned they won't hesitate to defend
[0:32] Speaker 1: the currency. Further.
[0:34] Speaker 2: We haven't seen something like this and what fifteen years.
[0:36] Speaker 2: President Donald Trump said the joint intervention was a signal
[0:40] Speaker 2: of Washington's friendship with Tokyo.
[0:42] Speaker 1: They do. They have a weakening yen, and they wanted
[0:45] Speaker 1: a little bit of help, and we're always there for
[0:47] Speaker 1: Japan Japan's.
[0:48] Speaker 2: The Japanese yen had been slumping for months, hitting a
[0:51] Speaker 2: forty year low against the US dollar. Treasury Secretary Scott
[0:55] Speaker 2: Bessen raised concerns about the yen volatility earlier this year,
[1:00] Speaker 2: and currency traders have been on high alert for the
[1:02] Speaker 2: US to step in to support the yen. But the
[1:05] Speaker 2: most telling clue that the US might make a move
[1:08] Speaker 2: came at a cabinet meeting last Friday. At Camp David.
[1:11] Speaker 1: It's an honor to be here in this historic place.
[1:14] Speaker 2: During that meeting, a photographer looking over Beson's shoulder spotted
[1:18] Speaker 2: something that caught his eye.
[1:20] Speaker 1: A photographer from Royt's captured an image of Scott Besson's
[1:25] Speaker 1: night pat.
[1:26] Speaker 2: And scribbled across the page were a few words that
[1:29] Speaker 2: would soon grab the attention of investors around the world.
[1:33] Speaker 1: The knight peck clearly displayed underline webs today, and on
[1:37] Speaker 1: it it showed by Japanese yen five to ten bill.
[1:42] Speaker 2: That's Bloomberg's Ruth Carson. She covers Asia's foreign exchange markets
[1:46] Speaker 2: from Singapore. The US stepped in to buy the Japanese
[1:50] Speaker 2: yen on Friday. Ruth says it was a rare move.
[1:54] Speaker 2: The US has intervened in the market for the Japanese
[1:56] Speaker 2: yen only twice in the last thirty years.
[1:59] Speaker 1: The fact that you've got the US essentially coming in
[2:04] Speaker 1: a way to Japan's rescue shows that this is not
[2:08] Speaker 1: just a japan problem any Ilonka.
[2:15] Speaker 2: This is the big Take Asia from Bloomberg News. I'm Wanha.
[2:19] Speaker 2: Every week we take you inside some of the world's
[2:22] Speaker 2: biggest and most powerful economies and the markets tycoons and
[2:26] Speaker 2: businesses that drive this ever shifting region. Today, in the show,
[2:31] Speaker 2: Japan and the US played tag team to rescue the
[2:34] Speaker 2: yin what's at risk for American consumers if the plan
[2:38] Speaker 2: doesn't work? And why a weekend is a problem for
[2:41] Speaker 2: the global economy, not just for Japan Ruth. To understand
[2:51] Speaker 2: what's happening this week, we actually need to flash back
[2:55] Speaker 2: to Japan in the nineteen eighties. Can you paint a
[2:58] Speaker 2: picture of Japan's economy.
[3:00] Speaker 1: In a word booming? The Nika gained more than four
[3:05] Speaker 1: hundred and fifty percent over a decade. It was explosive.
[3:09] Speaker 1: Interest rates were still low, bangs were gangbusters in terms
[3:15] Speaker 1: of landing aggressively. There was optimism about the Japanese economy,
[3:21] Speaker 1: so that fueled a frenzy of buying stocks, property, and
[3:25] Speaker 1: then suddenly it came crashing down. In nineteen eighty nine,
[3:30] Speaker 1: the Bank of Japan raised interest rates in a big
[3:32] Speaker 1: way over the coming month's rates when from two point
[3:36] Speaker 1: five percent to six percent. It was a mental crazy
[3:39] Speaker 1: increase and suddenly, almost overnight, borrowing became so much more expensive.
[3:49] Speaker 1: Credit growth are the bags that were happily landing, just
[3:53] Speaker 1: no stved.
[3:56] Speaker 2: How did that long period of economic stagnation affect Japan's
[3:59] Speaker 2: interest so.
[4:01] Speaker 1: It went on for decades. One piece of action over
[4:06] Speaker 1: the period of months a year ended up being decades
[4:11] Speaker 1: of lost growth. The BOJA eventually cut rates to zero,
[4:16] Speaker 1: tried to revive growth, and Japan became the pioneer in
[4:19] Speaker 1: zero interest rates to try and bol study economy. But
[4:23] Speaker 1: it wasn't until recently that we've seen Japan began to normalize.
[4:28] Speaker 2: After decades of deflation. The Bank of Japan has come
[4:32] Speaker 2: under pressure to cool inflation. In March twenty twenty four,
[4:36] Speaker 2: the central Bank exited its zero rates policy, raising interest
[4:40] Speaker 2: rates for the first time in seventeen years. Including that move,
[4:44] Speaker 2: the BOJS raised interest rates five times in total.
[4:50] Speaker 1: Where our Japan interest rates today about one percent okay
[4:55] Speaker 1: US versus Japan. The interest rate gap at the moment
[5:00] Speaker 1: is two hundred and seventy five basis points against Australia.
[5:05] Speaker 1: It's three hundred and thirty five basis points with emerging
[5:10] Speaker 1: markets within a nature for example, there's a four hundred
[5:13] Speaker 1: and seventy five basis points difference with Brazil. It is
[5:17] Speaker 1: over one thousand and three hundred.
[5:20] Speaker 2: That's crazy, So Japan's interest rates are very, very low
[5:23] Speaker 2: compared to the rest of the world.
[5:24] Speaker 1: Correct as much as a journalist I write about japan
[5:29] Speaker 1: racing interest rates, as a trader, you will look at
[5:31] Speaker 1: it and go, ah, you know what that carry trade
[5:36] Speaker 1: to buy something like US treasuries or that wind farm
[5:40] Speaker 1: in Europe, or you know the costby Korean stocks. I'm
[5:45] Speaker 1: better off putting my money where I'm going to get growth.
[5:49] Speaker 1: And if I'm going to get a cheap funding currency
[5:51] Speaker 1: to fuel that, that absolutely why not? And that currency
[5:56] Speaker 1: is the yen?
[5:58] Speaker 2: And how does that borrowing yen and investing overseas put
[6:02] Speaker 2: pressure on the yen?
[6:04] Speaker 1: So to answer that question, you need to understand the
[6:09] Speaker 1: size of this carry trade investment. By some estimates, it's
[6:15] Speaker 1: over four trillion US dollars, bigger than the size of
[6:19] Speaker 1: India's economy. That is invested offshore. So investors are selling
[6:25] Speaker 1: the yen trillions of dollars of it in order to
[6:28] Speaker 1: fund investments offshore that are getting them more bang for
[6:31] Speaker 1: their buck. What does that mean for the yen? It
[6:34] Speaker 1: means continued pressure.
[6:35] Speaker 2: So these low interest rates are really locking in that
[6:38] Speaker 2: pressure for the Japanese yen. I wonder if you can
[6:41] Speaker 2: tick through some of the other factors weighing on the yen. Okay.
[6:45] Speaker 1: So if we take a macroeconomic look at Japan, it's
[6:48] Speaker 1: not just the carry trade, which is obviously fueled by
[6:52] Speaker 1: interesstrate differentials. Japan's national debt is over two hundred percent
[6:56] Speaker 1: of its GDP, by far the highest amount develop economies.
[7:01] Speaker 1: On top of that, you've got the ongoing Iran war.
[7:04] Speaker 1: Remember Japan is a huge importer of energy from the
[7:09] Speaker 1: Middle East, and if your input bill is higher because
[7:15] Speaker 1: of the war, that only fuels inflation problems in Japan.
[7:19] Speaker 1: And if the boj is seen behind a curve to
[7:22] Speaker 1: raise interest rates to combat set inflation, the yen is
[7:26] Speaker 1: another release or escapefol for investor angst, and one critical
[7:31] Speaker 1: component to this story of a week n is also
[7:35] Speaker 1: the impetus of local investors to investor offshore. You've got
[7:41] Speaker 1: pension titans, life insurer titans that are some of the
[7:44] Speaker 1: biggest investors in the world, and they have liabilities to match.
[7:48] Speaker 1: They have to pay people that pensions. If inflation is
[7:51] Speaker 1: eating into your returns, do you have an incentive to
[7:55] Speaker 1: pull that massive amount of money offshore back home or
[7:59] Speaker 1: do you hitch bets and continue investing offshore and take
[8:03] Speaker 1: only some of that money back on shore. All this
[8:07] Speaker 1: is not good for the yen.
[8:08] Speaker 2: Now, there are pros and cons of a week end
[8:11] Speaker 2: for Japan.
[8:11] Speaker 1: Right, Absolutely, it becomes more desirable, isn't it to visit
[8:16] Speaker 1: a destination like Tokyo or Kyoto. But that's equally lots
[8:20] Speaker 1: of cons as well well.
[8:23] Speaker 2: Yeah, and especially if you are a Japanese consumer, if
[8:26] Speaker 2: you're living here in the country, you're feeling the pain
[8:29] Speaker 2: of that week in right.
[8:30] Speaker 1: Absolutely, import costs and househole expenses are soaring. Small businesses
[8:38] Speaker 1: are getting squeezed as well, and that's why we've seen
[8:42] Speaker 1: some of the policies that have come through, right from
[8:45] Speaker 1: Prime Minister Sanayi Takaichi with tax initiatives to help with
[8:49] Speaker 1: that cost of living.
[8:50] Speaker 2: So that high cost of living has become a huge
[8:53] Speaker 2: issue here in Japan. That's also contributed to really the
[8:56] Speaker 2: downfall of the two previous prime ministers.
[8:59] Speaker 1: Absolutely, right, voters will vote and if they are feeling
[9:05] Speaker 1: the pain that's stemming from a week yen. Absolutely we
[9:10] Speaker 1: have seen the downfall of Prime minister's leaders who have
[9:14] Speaker 1: failed to address voters pain and concerns.
[9:27] Speaker 2: This isn't the first time that the Japanese yen has
[9:29] Speaker 2: needed support from its government. After the break, we'll find
[9:33] Speaker 2: out why the US feels the need to get involved
[9:36] Speaker 2: this time around. The Japanese yen has needed a lot
[9:51] Speaker 2: of support recently. Bloomberg estimates that the Japanese government has
[9:55] Speaker 2: been spending significant amounts to prop up the currency, almost
[9:59] Speaker 2: seventy four billion dollars in April and more than eighty
[10:02] Speaker 2: billion over two days at the end of last week.
[10:05] Speaker 2: It's still unclear how much Washington has actually spent to
[10:09] Speaker 2: help lift the yen from its four decade low. The
[10:13] Speaker 2: joint intervention was likely larger than those undertaken in nineteen
[10:16] Speaker 2: ninety eight and twenty eleven, when US contributions didn't surpass
[10:21] Speaker 2: a billion dollars. Bloomberg's Ruth Carson says the huge US
[10:25] Speaker 2: purchases show that a week yen isn't just a problem
[10:28] Speaker 2: for Japan.
[10:30] Speaker 1: So the currency market trades at nine point five trillion
[10:34] Speaker 1: dollars a day a day, sorry, we're talking the biggest
[10:39] Speaker 1: asset class in the world. The yen is the third
[10:43] Speaker 1: most traded currency every single day in the world. That
[10:48] Speaker 1: shows you the amount of capital that's slushing about when
[10:52] Speaker 1: it comes to yen bets. So if something goes awry
[10:57] Speaker 1: with a yen, for example, in this case it's ultra ultrau,
[11:01] Speaker 1: its impact isn't felt just in Tokyo or on shore.
[11:05] Speaker 1: It's a problem that can fester as far away as
[11:10] Speaker 1: Jakarta through to you know, South Parlo. So a couple
[11:17] Speaker 1: of key points to note. Japan, for example, is the
[11:20] Speaker 1: largest foreign investor of US treasuries in the world. If
[11:26] Speaker 1: they start selling to fund efforts to prop up the yen,
[11:32] Speaker 1: it pushes down the price of US bonds, it pushes
[11:35] Speaker 1: yeels higher, and that means higher borrowing costs for the US.
[11:39] Speaker 1: Suddenly it's no longer just that homeowner in Tokyo that's
[11:43] Speaker 1: feeling the pinch. If you have higher treasury yields in
[11:46] Speaker 1: the US, say in the thirty year, that's impacting that
[11:50] Speaker 1: New York mortgage holder.
[11:53] Speaker 2: Right.
[11:53] Speaker 1: And on top of that, we talked about the yen
[11:56] Speaker 1: carry trade, and it's trillions of dollars around the world
[12:00] Speaker 1: and it's cemented, right, So we saw that. We saw
[12:04] Speaker 1: that happen in August twenty twenty four when the yen
[12:07] Speaker 1: suddenly searched and wiped out profits of hedged funds, stock investors,
[12:13] Speaker 1: credit investors were trembling. And it's impactful to the ploy
[12:17] Speaker 1: where it can destabilize global markets.
[12:21] Speaker 2: What does it mean for a government to intervene in
[12:24] Speaker 2: the currency markets? How does that actually work in practice?
[12:28] Speaker 1: In this case, the chain works like this. Japan sells
[12:32] Speaker 1: dollars which could be backed by as it's like treasuries
[12:36] Speaker 1: US Treasury bills to bolster the yen. So Japan's finance
[12:42] Speaker 1: ministry decides to intervene. We're acting now. The boj the
[12:47] Speaker 1: Bank of Japan, will act as its agent. Japan sells
[12:51] Speaker 1: US dollars from its FX reserves. It uses the dollar
[12:55] Speaker 1: to then buy the yen. To put this into context,
[13:01] Speaker 1: Japan has more than one trillion dollars in effex reserves.
[13:05] Speaker 1: That's a ton of firepower. Common Sachs in May after
[13:09] Speaker 1: April's intervention, then said that Japan could intervene about thirty
[13:17] Speaker 1: more times at its April intervention size and ruths.
[13:24] Speaker 2: How effective were these interventions? What happened to the end
[13:28] Speaker 2: after Japan's government intervened in April?
[13:31] Speaker 1: Okay, so the yen, we can pass one sixty per dollar.
[13:35] Speaker 1: Japan then conducted a yen buying operation on April thirtieth,
[13:39] Speaker 1: according to people familiar with the matter, and dollar yen plunged.
[13:43] Speaker 1: It went from around one sixty to one of fifty five, huge,
[13:47] Speaker 1: huge moves and wiped off a lot of that bearish
[13:52] Speaker 1: yen sentiment. Did it work in short, No, because they
[13:58] Speaker 1: had to intervene a again. Recently, dollar yen continued to
[14:04] Speaker 1: creep higher, and it comes down to that great differential
[14:08] Speaker 1: story again. So investors came back and it just kept
[14:12] Speaker 1: coming back to sell the en.
[14:15] Speaker 2: What's your take, Ruth on what's different about this latest intervention?
[14:21] Speaker 1: So the US involvement is historic. It's decades since we
[14:26] Speaker 1: had seen anything coordinated like this. But the fact that
[14:29] Speaker 1: you've got the US essentially coming in a way to
[14:34] Speaker 1: Japan's rescue shows that this is not just a Japan
[14:38] Speaker 1: problem any longer. That sends a strong signal. Whether or
[14:43] Speaker 1: not markets heeded is something else altogether. But the fact
[14:49] Speaker 1: that they have come out to work together is highly,
[14:53] Speaker 1: highly significant.
[14:54] Speaker 2: What's been the message on continued interventions? Is this the last?
[15:00] Speaker 1: So if we listen to Donald Trump, who's obviously underlined
[15:05] Speaker 1: that friendship with Japan, which kind of in a way
[15:09] Speaker 1: sort of lends heft to further intervention efforts. At the
[15:13] Speaker 1: same time, you've got the Finance Minister of Japan coming
[15:15] Speaker 1: out to say that there will be there could be
[15:19] Speaker 1: further coordinated intervention, so that definitely puts investors on hire
[15:25] Speaker 1: it This may not be a one off, it is
[15:28] Speaker 1: likely not going to be a one off when that
[15:31] Speaker 1: rate differential story is still very much in play.
[15:34] Speaker 2: And Ruth, what does a successful intervention look like for
[15:38] Speaker 2: the markets? It's hard to answer that again because it
[15:42] Speaker 2: hasn't worked. So successful intervention, one would say, is where
[15:48] Speaker 2: the yen does not only strengthen but keep its strength.
[15:53] Speaker 2: Where you will get investors in Japan and mega funds
[15:57] Speaker 2: coming out to say we are buying Japanese assets mass ones, well,
[16:01] Speaker 2: we are bullish on the yen, and that sends strong
[16:04] Speaker 2: signals to the rest of the world that hey.
[16:06] Speaker 1: You know what, it worked. We are now believing the
[16:11] Speaker 1: story of a stronger yen. But I don't see firm
[16:14] Speaker 1: evidence of that just yet.
[16:17] Speaker 2: And what do you think needs to happen for Japan
[16:20] Speaker 2: to wean itself off of the need for these interventions?
[16:23] Speaker 1: Raise interest rates and raise it fast and high without
[16:29] Speaker 1: destabilizing one of the world's biggest and most important economies.
[16:34] Speaker 1: When I speak to investors, when I speak to traders,
[16:37] Speaker 1: the number one reason they cite as to why they're
[16:41] Speaker 1: selling the yen is because of Japan's wide interest rate
[16:47] Speaker 1: gaps with the US and the rest of the world. Now, remember,
[16:51] Speaker 1: we can debate about a Bank of Japan policy and
[16:53] Speaker 1: how careful they are, and they have to be without
[16:57] Speaker 1: destabilizing their own economy and balancing a week yin so
[17:02] Speaker 1: they have their reasons to act the way they do.
[17:05] Speaker 1: But while the japan interest rate gap with the US
[17:09] Speaker 1: is so large, investors will still return to it.
[17:12] Speaker 2: Anko.
[17:12] Speaker 1: That's a juicy trade right there, to keep selling the en.
[17:22] Speaker 2: This is The Big Take Asia from Bloomberg News. I'm wanha.
[17:27] Speaker 2: To get more from The Big Take and unlimited access
[17:29] Speaker 2: to all of Bloomberg dot Com, subscribe today at Bloomberg
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