Washington and Japan prop up the yen, but stability is an illusion
By Ruth Behrens · Reporting from Newell, Iowa ·
The smell of fresh hay and diesel fuel is honest; it tells you exactly what kind of work needs doing, day in and day out. Global finance, by contrast, smells like old money and desperation.
When the Currency Needs a Handout from Washington
The smell of fresh hay and diesel fuel is honest; it tells you exactly what kind of work needs doing, day in and day out. Global finance, by contrast, smells like old money and desperation. Last week, when the Japanese yen hit a 40-year low—a level that should have sent shockwaves through every corner of Main Street—the response was not market discipline, but a joint intervention. Japan’s Ministry of Finance and the U.S. Treasury Department stepped in to prop up the currency. Donald Trump, on Sunday, simply stated: "They have a weakening yen, and they wanted a little bit of help. And we’re always there for [Japan]."
The facts are stark: The joint intervention was necessary after the yen weakened significantly due to Japanese borrowing costs remaining lower than in other advanced economies, fueling what analysts call a “carry trade.” While Japan's finance ministry stated this action "countered excessive volatility," the reports from CNBC and BBC paint a picture of temporary triage. UBS strategists noted that the yen should be supported more by intervention risk than by domestic monetary fundamentals.
The Illusion of Stability in a Union of Paper Promises
The sheer spectacle—the joint move, the commitment from Scott Bessent that Washington "will not hesitate to participate"—is meant to reassure us of stability. But this is precisely where the illusion begins. A currency union, whether it’s the yen or the euro, can mask deep, uneven structural imbalances that require fundamental alterations to governance for sustained stability.
I think we all remember the Eurozone crisis. That was a brutal lesson in how a shared currency, without corresponding shared fiscal authority, simply shifts the burden of debt and weakness from one corner of the continent to another. The fix applied last week—the promise of more joint intervention—is nothing but a temporary patch on a structural wound. It is not governance; it is merely an expensive tourniquet.
Why Intervention Is Never the Answer
The core problem, as Oxford Economics advises, is that this coordinated action "would not be enough to reverse the trend of yen weakness." The real issue isn't volatility; it’s the inability of Japan—or any nation—to fund its own necessary changes without external propping.
This kind of intervention undermines true confidence. Robin Brooks wrote that Washington selling euros instead of dollars to buy yen "undercuts the efficacy of U.S. participation." It makes the market wonder why we didn't just fund Yen buying out of Dollars all along. The people closest to the ground—the farmers, the shop owners, the folks running the local school—they know that true strength comes from self-reliance and shared ownership, not from Washington’s promise to keep a currency afloat with borrowed dollars or euros.
The lesson here is always the same: A nation cannot be sovereign if it must rely on temporary foreign intervention to maintain its basic economic function. We are told this joint action will deter speculators, but what it really does is teach us that when times get tough, we expect handouts from our neighbors—or worse, from Washington.
Federal funds rate%22%2C%22fill%22%3Atrue%2C%22pointRadius%22%3A0%2C%22borderWidth%22%3A2%2C%22tension%22%3A0.2%7D%5D%7D%2C%22options%22%3A%7B%22plugins%22%3A%7B%22legend%22%3A%7B%22display%22%3Afalse%7D%2C%22title%22%3A%7B%22display%22%3Atrue%2C%22text%22%3A%22Federal%20funds%20rate%22%7D%7D%2C%22scales%22%3A%7B%22x%22%3A%7B%22ticks%22%3A%7B%22maxTicksLimit%22%3A6%7D%7D%7D%7D%7D)
Federal funds rate. Source: Federal Reserve Economic Data (FRED).