15: Is America Saving the Yen — or the US Treasury Market?

Japan made financial headlines last week after spending over $50 billion to defend its currency. Even more noteworthy was the U.S. response: For the first time since 1998, the U.S. Treasury intervened to help strengthen the yen, selling euros in the process. In the latest episode of “The Two Handed Economist,” John Diamond dives into these currency moves and explains why the U.S. is intrinsically tied to the stability of the Japanese yen. This episode explores the yen carry trade, Japan’s enormous holdings of U.S. treasuries, the Foreign and International Monetary Authorities (FIMA) Repo Facility and its potential expansion, and why Washington may have a powerful incentive to prevent Japan — and other foreign holders — from selling American government debt. Diamond also examines the Treasury’s recent decision to dramatically expand long-term bond buybacks and asks whether these moves point to a broader effort to stabilize America’s increasingly vulnerable bond market. This conversation was recorded on Aug. 19, 2026. Mentioned in this episode: Economist Mohamed El-Erian, https://x.com/elerianm/status/2090058533005836374. “Economists Warn That Treasury’s Bond Markets Fix Is Short Term,” (NOTUS), featuring RSM’s Chief Economist Joe Brusuelas. “Treasury doubles debt buybacks as Bessent moves to steady bond market,” (CNBC), featuring Peter Boockvar, chief investment officer at One Point BFG Wealth Partners. Follow John Diamond on X (@jw_diamond) and LinkedIn. You can follow @BakerInstitute on X, Instagram, LinkedIn, and YouTube. Learn more about our data-driven, nonpartisan policy research and analysis at bakerinstitute.org.