Brad Setser on the US's Unusual Japanese Yen Intervention
Summary
Hosts Tracy Alloway and Joe Weisenthal discuss the recent U.S. and Japanese currency intervention to support the weakening yen, sparked by a viral photo of Treasury Secretary Scott Bessent’s to-do list. Guest Brad Setzer explains the complex drivers behind East Asian currency weakness, including hedging flows and trade surpluses, and analyzes the use of the FEMA repo facility. The conversation also addresses Japan’s surprisingly stable fiscal position and the likelihood of future Bank of Japan rate hikes.
Topics discussed
Intro: AI investing and Bloomberg Live Tech London
Scott Bessent's to-do list and yen intervention context
Brad Setzer on BOJ rate hikes and inflation targets
East Asian currency weakness: Korea, Taiwan, and trade
Ad break: Interactive Brokers
Ad break: Bloomberg This Weekend and Elf ears
Speculative betting and hedging dynamics in the yen
US Treasury concerns and the mechanics of FX intervention
Currency valuation models: Big Mac index and PPP
FEMA repo limits and Treasury's firepower constraints
Outro music and transition
Will intervention work? Adam Posen and BOJ rate paths
Japan's fiscal health: Primary surplus and debt dynamics
Comparing Japan's fiscal position to the US
Wrap-up: Lost decade memory and podcast credits
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