Key facts
- Japan intervened in FX markets in May to support the Yen.
- The intervention involved selling US Treasuries.
- Dollars were acquired by selling US Treasuries to buy Yen.
- This action likely contributed to a spike in US yields in May.
Japan's official foreign exchange intervention in May to prop up the weakening Yen involved a significant sale of U.S. Treasury securities. The proceeds from these sales were used to purchase U.S. dollars, which were then exchanged for Yen in the market. This large-scale selling of U.S. debt by a major foreign holder is seen as a contributing factor to the upward pressure on U.S. Treasury yields observed during that month. The move underscores the interconnectedness of global financial markets and the potential impact of sovereign currency support operations on benchmark interest rates.