A 'weaponized' yen: How the U.S.-Japan intervention may reshape global currency markets

The Japan flag juxtaposed against a Japanese yen bank note.Javier Ghersi | Moment | Getty ImagesThe unprecedented U.S.-Japan intervention to support the yen may end up shaping market behavior. Japan has intervened in currency markets before, but this episode was bigger than usual. It was backed by Washington, reportedly executed using the euro-yen cross rather than directly in dollar-yen, and accompanied by explicit political support.Some investors consider this a major step."Japan's Ministry of Finance and the U.S. Treasury have successfully weaponized the yen," said Jesper Koll, expert director for Monex Group, referring to market deterrence. The intervention went beyond conventional foreign exchange management because the countries deployed public balance sheets in concert to influence market psychology, he said."When increasingly scarce national assets are spent in unison on the same target by two major sovereigns, markets will have to listen," he added.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. Poli...