Yen rescue has echoes of Asian financial crisis, former FX diplomat warns
By Aboki Forex —
Japan's latest efforts to support the yen remind one former senior currency diplomat of the Asian financial crisis. The situation differs from traditional coordinated currency intervention, but the underlying dynamic is uncomfortably familiar.
US backs Tokyo with dollar swap lines
The United States Treasury Secretary said this month that Washington had joined Tokyo's efforts to halt the yen's decline. Bessent encouraged Japan to use dollar swap lines to finance future currency-market intervention.
Former Japanese currency diplomat Shinohara said the situation reminded him of the Asian financial crisis, when access to US dollar liquidity became a critical issue across the region. During that crisis, the United States, Japan and the International Monetary Fund provided Thailand with dollar funding to strengthen its foreign-exchange reserves.
July 31 intervention was unusual
Shinohara stressed that Japan's current circumstances are very different from Thailand's position during the crisis. But he said the underlying dynamic had some uncomfortable similarities.
Shinohara also said the July 31 intervention differed considerably from conventional coordinated currency intervention.