Sean Foo brings a lot of information on Friday's bailout of the Japanese yen, but his videos are a bit alarmist, while "House of El" provides a deeper analysis. El has had an interesting life, being born at the Vatican, her first language was Latin, and as you could imagine, the first words she learned were "Noli tangere!" (Don't touch!) and she spent several years in Denmark for university. Here is her analysis-
Here is a transcript of this video, very important information - it can't be summarized, so I have to print the whole piece:
"This is not financial advice, but this might be the most consequential financial story this channel has ever covered. And there is a reasonable chance you will not see it discussed on most mainstream outlets because it requires understanding four interconnected systems simultaneously to grasp why it matters. The United States is in serious trouble. The situation is very convoluted. But what we're about to witness is a house of cards in the early stages of collapse. I'm going to walk through it step by step. Take your time with this one.
On Friday morning, during a cabinet meeting at Camp David, Reuters photographer Daniel Hoyer captured a photograph over Treasury Secretary Scott Bessent's shoulder. On the notepad in front of him, positioned directly beneath his name card with nothing else written on the page were the words "To do: Buy Japanese yen 5 to 10 billion." Hours later, the Federal Reserve Bank of New York sold euros to buy yen on behalf of the US Treasury. The yen surged. The intervention was confirmed. And the United States government did something it has not done since 2011 when a magnitude of 9.0 earthquake and a nuclear meltdown at Fukushima devastated Japan and the G7 coordinated emergency currency support to prevent the country's financial system from collapsing. There is no earthquake this time. Thankfully, there is no tsunami.
There is no nuclear disaster. The disaster is the US bond market. And Bessent just told the world that the United States is now spending billions of dollars to prop up another country's currency because the alternative is watching its own borrowing cost spiral out of control. Now, feelings aside, this kind of breach is unprecedented for a sitting Treasury Secretary. Generally, in central banking and treasury circles, operational security is not really a preference. It is a foundational principle. Markets move on information and a photograph to-do list containing the size and direction of a currency intervention is the kind of leak that in any other context would trigger an internal investigation, possibly a resignation as well. And I need to explain why the US Treasury buying Japanese yen is actually about protecting the US Treasury bond market. Because that connection is the reason this story matters more than almost anything else happening in the global economy right now. And I need to explain it simply first because it's deeply consequential. And second, because the mechanics are not actually that complicated. They're just kind of hidden.
Let's start with Japan. The yen hit 163.99 to the dollar last week. That's the weakest level since December 1986, a 40-year low. Japanese companies are going bankrupt at the highest rate in 12 years, over 5,000 in the first half of 2026 alone, with 45 specifically citing the weak yen as the cause of their collapse. At this point, starting a business in Tokyo carries roughly the same financial risk profile as opening an underwater fireworks store. Import costs for food, fuel, and raw materials have surged. Wholesale inflation is running above 6% and the Bank of Japan is a bit trapped. It hiked rates to 1% in June, the highest since 1995.
But the yen kept falling because the gap between Japanese rates at 1% and American rates at nearly 4% is still enormous. Money flows to wherever the yield is higher. And the yield right now is higher in the USA. That flow weakens the yen and strengthens the dollar, which sounds like it should be good for the United States. It is good for the United States in the exact same way that eating 5 lbs of free cotton candy is good for your short-term blood sugar.
It's not. And understanding why is the key to understanding everything that happened on Friday. When Japanese institutions like pension funds, insurance companies, banks send money to the United States to buy Treasury bonds, they are lending the US government money. Japan holds $1.14 trillion in US Treasuries. It is the single largest foreign holder of American government debt. But when the yen collapses, those institutions face a growing problem. The value of their American investments denominated in dollars stays the same in dollar terms, but the cost of converting those dollars back into yen to pay Japanese retirees, Japanese policy holders, and Japanese depositors, becomes progressively more expensive with every move in the exchange rate. At some point, the currency loss eats the yield advantage entirely. And when that happens, the rational decision, or rather the only decision, is to sell the American bonds, bring the money back home, and just buy Japanese government bonds that now yield nearly 4% on the 30-year, which is enough to meet domestic obligations without the currency risk that is destroying returns on the American side. That is exactly what has been happening. We covered a bit of this on this channel as well.
Japanese holdings of US Treasuries have fallen from 1.22 trillion to $1.14 trillion. $66 billion gone in a matter of months. The selling accelerated sharply in the first quarter of 2026 when the Japanese investors dumped $29.6 billion in a single quarter, which is the largest selloff since 2022. And every dollar Japan sells puts upward pressure on US bond yields. Because when a major buyer exits, the remaining buyers on this planet demand higher returns to compensate for the reduced demand. The 30-year US Treasury yield has been above 5% for over a month now, which is the longest stretch since 2007, the year before the great financial crisis.
The interest bill on America's national debt now exceeds the combined budgets of the Department of Defense, Homeland Security, Commerce, Education, the EPA, and the Small Business Administration. All of these combined, the government borrows $155 billion every single month. $24 billion a week goes to interest alone. That is not a national budget. That is the global equivalent of lighting a brand new superyacht on fire every 6 hours just to keep the Oval Office warm. And Bessent needs to borrow 900 billion more by October to fund the deficit. So now you see the full chain. The yen falls. Japanese institutions sell treasuries to bring money home. Treasury selling pushes US yields higher. Higher yields make the deficit more expensive. And more expensive deficit requires more borrowing. More borrowing at 5% requires more buyers. But the biggest buyer is the one who is actually selling. And that is why the United States just spent 5 to10 billion buying yen. Bessent is not saving Japan. He is saving his own bond market. The yen is just the mechanism. The treasuries are the target and the notepad was just the announcement.
The coordination was broader than just the United States and Japan, however. On Thursday, Japan and South Korea both intervened simultaneously, selling dollars and buying their own currencies in what Reuters described as a rare coordinated intervention. The yen jumped more than 3% in a single session, which is its biggest one-day gain in nearly two years. South Korean authorities confirmed they were acting in coordination with Tokyo. And then on Friday, Japan's top currency diplomat, Atsushi Mimura, said something very extraordinary. We are receiving support from the United States that goes beyond psychological support and I'm constantly in contact with relevant authorities. So that phrase "beyond psychological support" is essentially in my view, diplomatic language for America is putting its own money on the table. It's not advice. It's not statements. Money, literal money.
Here comes the most important part in the story. The Financial Times reported that the New York Fed sold euros to buy yen on the Treasury's behalf. I want you to hear that again because it contains the structural detail that connects this story to every European sovereignty video this channel has ever made. This is why this story is so consequential. The Federal Reserve sold European currency to buy Japanese currency to prevent the US bond market from destabilizing further. Europe's currency was used as the funding mechanism for an intervention designed to protect America's fiscal position.
The European Central Bank was not consulted. European central bankers were not asked. Europe essentially woke up this morning to find America had taken their corporate credit card, bought 10 billion worth of Japanese foreign exchange and left the tab on the kitchen counter with a little thanks post-it note. The euro was simply sold, weakening it at the margin, to fund an operation that benefits the United States and Japan at Europe's expense.
And this is happening in the same month that the ECB, the European Central Bank, published data showing the euro is becoming a safe haven currency, that Amazon and Alphabet are borrowing in euros at record scale, and that euro- denominated bond issuance hit an all-time high. Europe is building the euro into a reserve currency alternative. The United States is selling it to prop up the yen. The contradiction could not be any sharper and the timing could not be worse for Scott Bessent, because the ECB is expected to hike rates again before the end of the year. Eurozone inflation remains above target 2.9% in July and rising again after briefly easing in June driven by renewed fighting in the Middle East, pushing energy costs higher. Christine Lagarde has already hiked once in June and described the decision as robust across all scenarios. If the ECB hikes again, the euro strengthens further. A stronger euro means the dollar Bessent sold to buy yen funded by selling euros become more expensive to replace. It also means European bonds become more attractive relative to American ones pulling capital towards Frankfurt and away from Washington again at precisely the moment Bessent needs that capital flowing in the opposite direction. They're shooting themselves in the foot again.
The intervention used the euro as fuel. The ECB is about to raise the price of that fuel, basically. And every basis point the ECB adds makes the structural case for holding euros instead of dollars more compelling, which is exactly what the ECB's own annual report documented this year when it showed euro bond issuance at an all-time high. American companies are borrowing in euros at record scale and the euro behaving as a safe haven during every major crisis since 2025.
Bessent sold euros to buy time. The European Central Bank is about to make that time a lot more expensive. This intervention worked for about 12 hours, which gives this multi-billion dollar global economic maneuver roughly the same shelf life as a fresh pint of draft beer on a very hot summer afternoon, of which we've had so many in Europe, haven't we? On Thursday evening, the yen surged to 157.8 from its 163.9 low. By Friday morning, it had already weakened again, backed above 160. The Bank of Japan held rates steady on Friday, unable to hike further because of 6% yields. Japan's entire tax revenue would go to servicing its own national debt. The structural problem which is a 400 basis point interest rate gap between the US and Japan remains completely unresolved despite these interventions and every previous intervention has produced a shorter lasting effect than the one before it.
Japan spent $70 billion on intervention in April and May of this year. The yen fell to a new 40-year low anyway. Japan spent $62 billion in 2024. The yen fell to a 38-year low anyway. The interventions buy hours or maybe days, the structural forces by months and years, and the structural forces right now are all pointing in the exact same direction. Japanese money coming home, US yields going up, and Bessent running out of tools to stop this. And here's the detail that raw story, Forex.com, and several market analysts all noted independently. Bessent's notepad appeared to be deliberately exposed. There was nothing else written on the page. His name card was positioned directly above it. The photograph was taken during an on-the-record portion of the cabinet meeting, meaning cameras were allowed and expected. Last time a Bessent notepad was photographed during a White House briefing in May, it said resilience written three times. When asked about it the next day by a Daily Mail reporter, Bessent laughed and said, I'm quoting "so people could look over my shoulder, photograph them, and think they got a scoop." He is telling you how the game is working. In my personal view, it does not appear that the notepad is an accident. It appears to be a signal designed to move markets without the Treasury having to issue a formal statement that would commit it to a specific policy. By telling a photograph capture "buy Japanese yen 5 to 10 billion dollars," Bessent, in my view, achieved the same market impact as an official announcement while retaining the ability to deny, modify or abandon the position at any time. It is monetary policy by post-it note. We have officially reached the era where global reserve currency dynamics are managed by using the exact same operational strategy as reminding your roommate to buy toilet paper. And the fact that the most powerful financial official in the world is communicating through staged notepad photographs tells us a little bit about how precarious the situation has become, because when you have strong options, you use them. When you have weak options, you perform them. The broader context makes Friday's intervention even more alarming in my view.
The US has not intervened in the yen market since the Fukushima disaster in 2011. That intervention was a genuine humanitarian and economic emergency. A 9.0 earthquake followed by nuclear meltdown. Unfortunately, that was a horrible time. The G7 all coordinated because Japan's entire financial system was at risk of collapse. That was the right thing to do at that time.
Friday's intervention happened because yields are too high and the yen is too weak. There is no natural disaster. There is no nuclear accident. Thankfully, there is just a bond market that is slowly repricing the fiscal reality of a country that borrows $2 trillion a year during peace time, that is fighting a war it cannot afford, that has tariffed 60 countries simultaneously, that has alienated every major ally, and whose strategic petroleum reserve is at its lowest level since 1983.
The emergency that triggered intervention is not external. It is the accumulated consequence of every policy decision this channel has been documenting since February. And the fact that the response is a staged notepad photograph and a $10 billion currency purchase tells you that the Treasury knows the situation is fragile and that the tools available to address it are performative rather than structural. Once again, this is not financial advice and these are just my own personal views. But let me take a shot at what might happen again in the future. My prediction is that the yen intervention probably does not hold beyond the first week of August. The structural interest rate gap between the US and Japan remains in my view too wide for any amount of intervention to close permanently. Japanese institutional selling of US Treasuries will likely resume as the intervention effect fades because the underlying incentive to bring money home has not really structurally changed. The 30-year US yield will likely retest 5.2% before the end of August. Bessent will probably need to intervene again or find another way to signal support before the September Treasury refunding announcement, which will be the largest quarterly borrowing program in American history. The Bank of Japan will likely be forced to hike rates again before the end of the year, not because it wants to, but because the yen will leave it no choice. And that hike will accelerate the carry trade unwind and the Treasury selling that the intervention was designed to prevent. And Europe, whose currency was sold without consultation to fund an intervention designed to protect America's bond market, will note that the United States used the euro as a tool without asking permission exactly as it uses European data, European airspace, European spectrum, and European regulatory compliance as tools whenever it suits American interests.
The pattern always appears to be the same. The only thing that appears to change is which European asset gets spent without being asked. But while Bessent writes "by Japanese yen" on a notepad at Camp David, Europe is building the euro into the currency the world runs to when things go wrong. I made a separate video analysis on how Amazon and Alphabet are borrowing in euros at record scale. The European Central Bank made euro liquidity permanently available worldwide. And the euro is now appreciating during crisis instead of depreciating. That's the video that I would watch. {End}
§Comment: Japan's fossil-fuel requirements must be imported, they don't have their own supply. This is a constant drain on their currency reserves, which have been depleted greatly this year in trying to prop up the yen. With declining currency reserves, they turn to selling bonds - meaning U.S. Treasuries (bonds) to fund their economy. Japan has been America's largest creditor, propping up the extravagant consumption (and military) of the U.S. So in effect, by selling Treasuries, they are calling in their loans to the U.S.
On one hand, the future of humanity rests in defeating the USrael (US + isra3l) Empire - the bad news is the world's central banks finding their supposed reserves being a pile of almost worthless paper (Treasuries). Japan could have had a future as a growing industrial powerhouse, but lacking a cheap energy supply, it is in a bind, as is Europe. Then consider what is supposed to be an intelligent (almost-)country, Canada, selling off its energy supply AT A DISCOUNT, for quick cash to prop up its low-productivity economy. And wanting to build yet another pipeline to ship off a doubling of oil production for export cash. All the easy oil is long gone, leaving Ontario and Alberta as a pin-cushion of abandoned wells. Most oil production now comes from fracking or the environmentally-destructive tar sands, at high production costs, plus the cost of pumping it over the Rocky Mountains.
Contrast these high production costs with Venezuelan Merey 16 crude, which will start arriving Chevron-Mississippi at a delivered price of about US$10/bbl.
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