Beisent "little note" exposed: Is the U.S. worried that the next round of yen manipulation will harm U.S. bonds?

With the fluctuations in the yen exchange rate hitting record lows not seen since 1986 on Thursday and Friday this week, speculation that the Japanese government would intervene in the currency market has become almost a certainty. (USD/JPY exchange rate fluctuations, source: TradingView) However, unexpectedly, the U.S. Treasury Department also took action this time. According to multiple media reports citing informed sources, the U.S. Treasury directed the New York Federal Reserve on Friday to execute operations to "sell euros and buy yen." As evidence of this movement, U.S. Treasury Secretary Janet Yellen was seen writing on a notepad, "To do: Buy yen (JPY), 5-10 billion." It is reported that on Friday, local U.S. time, the Trump cabinet held a live cabinet meeting at the president's retreat in Camp David. As usual, Yellen sat across from Vice President Mike Pence, with a throng of journalists behind them holding cameras and microphones. In the presence of reporters, Yellen confidently wrote on her notepad: "To do: Buy yen (JPY), 50-100 billion." Unsurprisingly, this note was photographed and went viral across the globe. In the past 30 years, the U.S. and Japan have only jointly intervened in the currency market twice. During the 1998 Asian Financial Crisis, the U.S. and Japan coordinated to buy yen; in 2011, following the Great East Japan Earthquake that triggered a sudden appreciation of the yen, the G7 western nations, including the U.S., collaborated with Japan for a joint intervention. Some analysts have pointed out that Yellen, a "veteran of the currency market" who, in 2012, led Soros Fund Management in a short sale of the yen, netting more than a billion dollars in just three months, is personally stepping in to "rescue the yen" to prevent Japan's situation from spiraling out of control and affecting U.S. Treasuries. This week, due to the U.S.-Iran War and a trust crisis surrounding the new Federal Reserve Chairman Jerome Powell, long-term U.S. Treasury yields reached a new high not seen since the subprime mortgage crisis. (U.S. 30-year Treasury yield, source: TradingView) If Japan were to initiate another massive sell-off at this time, it would put Yellen in an even more passive position. In January, during the turmoil caused by Prime Minister Fumio Kishida's fiscal policy, Citigroup predicted that the resulting market conditions could trigger a sell-off of U.S. Treasuries worth up to 130 billion dollars. Reports indicate U.S. officials privately expressed concerns to Japan, fearing that Kishida's aggressive fiscal stance could cause her to "repeat the mistakes of former British Prime Minister Liz Truss." Currently, in the face of the yen crisis, the Japanese government has been rapidly consuming foreign exchange reserves to stabilize the currency, but with limited success. Market estimates indicate that the scale of intervention by the Japanese government and central bank in the currency market this Thursday was about 6 trillion to 7 trillion yen. Combined with the 11.7 trillion yen (approximately 743 billion dollars) used for interventions from late April to late May, the cumulative intervention has reached 18 trillion yen (114.3 billion dollars), surpassing the previous historical annual record of 15.3 trillion yen set in 2024. The U.S. Treasury's international capital flows report had previously indicated that Japan sold 66.75 billion dollars in U.S. Treasuries in May, roughly aligning with the forex intervention operations. However, that intervention only had an effect lasting one month, as the yen depreciated back to pre-intervention lows by early June. Early Saturday morning, the Japanese Ministry of Finance also posted on social media that, if necessary, it might use the Federal Reserve's FIMA Repo Facility, which offers temporary U.S. dollar liquidity support by collateralizing U.S. Treasuries. (Source: X) Believing that merely pouring money into the currency market will not solve the problem of yen depreciation, Yellen specifically mentioned on social media on Friday that she looks forward to reuniting with Bank of Japan Governor Kazuo Ueda at the G20 meeting at the end of August. Coincidentally, after Ueda announced that interest rates would remain unchanged on Friday, he also mentioned the "possibility of accelerating the pace of interest rate hikes" at a post-meeting press conference. This article is reproduced from "Financial Link," author: Shi Zhengcheng; GMTEight editor: Xu Wenqiang.