00:00Japan's yen has become so weak that even the U.S. has stepped in to try to stop its slide.
00:05It's the first coordinated U.S.-Japan intervention in 15 years,
00:09and both countries have said that more action could follow.
00:24But what's the yen gotta do with the U.S.?
00:27The yen is one of the world's favorite currencies to borrow given Japan's relatively low interest rates.
00:33Investors often use the borrowed yen to invest in other assets like U.S. treasuries for higher returns.
00:39That means sharp swings and volatility in the yen can influence global investment flows,
00:43with ripple effects across everything from U.S. bond markets to stocks.
00:48Plus, if Japan is left on its own to defend the yen,
00:51it may have little choice except to sell down part of its holdings of treasuries
00:55to fund more interventions which would have a negative impact on U.S. borrowing costs.
00:59There's also a political message of goodwill here.
01:02We have a good relationship with Japan.
01:04We're very strong, very, very strong financially.
01:08They have a weakening yen and they wanted a little bit of help.
01:12And we're always there for Japan.
01:14Direct intervention is the most immediate way to curb a currency's decline.
01:18Japan alone is said to have spent more than $50 billion last week to support the currency.
01:24The coordinated move with the U.S. helped push the currency higher.
01:27But interventions like this are ultimately a band-aid solution.
01:31The BOJ raised its benchmark rate to its highest since 1995 in June.
01:35But many analysts see the central bank as too cautious on rate hikes.
01:39And as long as Japan's interest rates remain low,
01:42investors may still be drawn to borrowing the yen and investing elsewhere,
01:46keeping a downward pressure on the currency.
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