What top minds in markets are saying about the US intervention to prop up Japan's currency

• The US just stepped in to help prop up the yen for first time in 15 years.
• The yen dropped to a 40-year low against the dollar last week amid fiscal concerns in Japan.
• The US sold euros instead of dollars to fund its yen purchases, a highly unusual move.

Japan's currency woes have been disruptive enough for the US to step in to help prop up the yen for the first time in 15 years.

All eyes were on Japan's financial markets on Monday after the US entered a joint effort with Japan to prop up the nation's sagging currency, which recently slumped to a 40-year low against the dollar as concerns build over Japan's fiscal outlook.

The yen plunged to 163 against the greenback last Thursday, its lowest level against the dollar since 1986. The currency surged on Monday, trading around 156 against the dollar as the US and Japan stepped up purchases to boost its value.

Japan's Finance Ministry on Monday said Japan and the US were purchasing Japanese yen in order to prevent further declines and quell volatility in the currency. It marks the first coordinated currency intervention the US has undertaken with Japan in 15 years, Goldman Sachs analysts said in a note. The US last intervened in 2011, but with the opposite aim, selling yen to weaken the currency following upheavals in the wake of the Fukushima nuclear disaster.

The intervention this time around is also unusual from an FX perspective. While Japan sold US Treasurys, which are dollar assets, to fund its yen purchases, the US Treasury sold euros to fund the move, the Financial Times reported on Friday.

Moves in US markets on Monday were largely dominated by optimism in stocks after the US called off new attacks on Iran, sending oil prices lower. But on the fringes, concerns are percolating about what the US and Japan's move means for the yen carry trade — a maneuver in financial markets where investors borrow yen at low interest rates and swap it into dollars to invest in higher-yielding assets, like US stocks and bonds.

The move has funneled tons of money into US markets over the years, and investors have been fretting about whether it could be in jeopardy if a stronger yen and higher rates disrupt the delicate relationship with the dollar.

Here's what's going on, and what top investing minds are saying about the intervention:

Goldman Sachs: US likely does not want Japan to sell dollars

The fact that the US has sold euros — and furthermore, has intervened in circumstances that differ from past currency crises — suggests that the US does not want to sell dollars on its own to purchase more of the yen, which would weaken the greenback, analysts at Goldman Sachs wrote in a note on Monday.

"Further yen weakness or continued USD-selling/JPY-buying interventions by Japanese authorities, is not welcomed from the US perspective," the bank said. "Compared to a solo intervention by a country aimed at defending its currency (or curbing currency appreciation), a coordinated intervention sends a stronger message to the foreign exchange market," it added.

Robin Brooks: US may be concerned about rising Treasury yields

Robin Brooks, a top economist and a senior fellow at The Brookings Institution, said the US move could be interpreted as concern about rising yields in the US. That might explain why the US sold euros to buy yen, but ultimately, the message to the market is "confusing," Brooks said.

"Japan sells US Treasuries when it intervenes to prop up the Yen, which can be a force for US yields to go higher," he said, adding that the market will now be wondering if the overarching concern should be that Japan's interventions are pushing US yields higher.

The sale of Treasury bond can cause yields to rise potentially higher at a time when markets are already worried about potentially disruptive moves amid concerns about higher inflation. The benchmark 10-year US Treasury yield was about 4.68% on Monday, above the 4.5% threshold that's closely watched by stock investors.

Meanwhile, the 30-year yield hovered around 5.2%, above the 5% mark that's acted as a headwind for stocks, and close to its highest level since the Great Financial Crisis.

Brooks added that the sale of euros adds to the market's uncertainty, and could prove "counterproductive."

Apollo: The carry trade has already broken down

The yen carry trade likely started to break down in April 2025, around the time President Donald Trump's "Liberation Day" tariff announcements, according to Torsten Sløk, the chief economist at Apollo.

In a note on Monday, he pointed to how the US dollar-to-yen exchange rate has deviated from the spread between the yields on the 10-year government bond in the US and Japan, meaning the yen carry trade is no longer tied to the fact that borrowing costs are significantly lower in Japan.

"The bottom line is that the yen carry trade has broken down, and the yen is no longer a rates story. Until volatility subsides, it will trade on Japan's fiscal outlook rather than the interest rate gap," Sløk said.

StoneX: Tech stocks risk sell-off if yen carry trade unwinds

If the yen carry trade were to unwind, that would pose a risk to US tech stocks, Gus Garrow, a senior manager at StoneX, wrote in a note on Friday.

Garrow pointed to the sell-off that tanked the Nasdaq 100 the last time the yen carry trade began to unwind, as a stronger yen and higher rates in Japan forced investors who borrowed yen to sell stocks to cover higher borrowing costs.

"When the Japanese yen strengthens and the trade turns against its holders, investors are forced to raise cash quickly, and richly valued technology names are among the easiest positions to sell," Garrow said of the potential risks. "As a result, a currency move that begins in Tokyo can surface hours later as a deleveraging wave across US equities," he added.

Macquarie: The 'tinder' for carry trade unwind is here

Macquarie is also concerned about what an upheaval of the carry trade could mean for markets.

"The lesson of 1998 is that coordinated intervention in the USD/JPY to bring the pair lower can succeed, but it needs the extra catalyst of a large unwinding of JPY-funded carry trades to create a big move lower. The tinder is there in 2026," Thierry Wizman, a global FX and rates strategist at Macquarie, wrote in a note.

He pointed to potential catalysts that could cause the trade to unwind, including if the Bank of Japan were to tighten monetary policy, if oil prices fall, or if fiscal policy goals of making the country's debt more sustainable were to change.

"But we still await those things," Wizman said.

The post What top minds in markets are saying about the US intervention to prop up Japan's currency appeared first on Business Insider