US Treasury buybacks raise yen intervention expectations

The US Treasury's unexpected decision to at least double long-term bond buybacks to $4 billion per operation has raised market expectations of new interventions to support the Japanese yen. Following the announcement, US long-term yields plunged, the dollar index hit a three-month low, and the yen strengthened. Traders interpret the expanded buybacks as coordinated intervention to prevent a mass sell-off of Treasury bonds triggered by yen depreciation and rising Japanese yields. The move signals yields will be kept under control, increasing concerns about further currency intervention ahead of the Jackson Hole symposium and G20 meeting. The yen remains pressured by Japan's fiscal and monetary policies, with markets pricing an 80% chance of a Bank of Japan rate hike in September. However, skepticism persists as Prime Minister Sanae Takaichi's government shows resistance to monetary tightening.