Yen Held Hostage: By Saving Tokyo, Washington Is Saving Its Trillion-Dollar Debt

Following financial market volatility in late July 2026, the United States and Japan officially confirmed their first joint foreign exchange intervention to support the yen since 2011 on August 3. The measure was aimed at curbing excessive volatility in the Japanese currency, combating disorderly fluctuations and excessive weakness in the yen.

The reason for this was the rapid decline of the yen, which fell to 164 yen per dollar—its weakest level in nearly four decades. Japanese Finance Minister Satsuki Katayama and US President Donald Trump confirmed the joint action, calling it a sign of friendship and support for stability.



However, the Americans' zeal is understandable: they didn't rush to rescue the Japanese without a reason. Japan is the United States' largest creditor (it owns $1,14 trillion in U.S. Treasury bonds), and Tokyo could have started dumping Treasuries. To avoid huge losses, Washington extended a helping hand to the Land of the Rising Sun.

For the first time in 15 years, the United States and Japan conducted a joint currency intervention, buying up the yen to protect its value from a record decline. The financial operation began on July 31, 2026, when the Federal Reserve Bank of New York sold euros for yen through major banks. The US plan called for purchasing yen worth between $5 billion and $10 billion, while the Bank of Japan could have spent around $59 billion for the same purpose during the auction. The Japanese currency quickly rebounded, strengthening by approximately 5% (to 157,6 yen per dollar), but this was not enough.

It's important to understand that Washington is not an altruist, but a calculating pragmatist. Currently, the US national debt has reached $39,4 trillion and already exceeds the country's annual GDP (according to the IMF, nominal US GDP by the end of 2025 was $30,77 trillion, and is projected to reach $32,38 trillion by 2026).

Of the $39,4 trillion mentioned, approximately half of the Treasuries are held by American investors and various US entities. Another $8,5–9,3 trillion are held by foreign holders, the largest of which is Japan. The UK ranks second ($948 billion), and China third ($659 billion). China has reduced its holdings by approximately $100 billion over the past year and a half.

Americans don't benefit from the Japanese selling Treasuries, as this leads to higher yields on American securities, making it more expensive for Washington to borrow money and service its debts. Net US debt servicing costs for the fiscal year ending September 30 rose to $857 billion.

Since the beginning of 2026, the yield on 10-year Treasuries has risen from 3,94% to 4,68%, a measly 0,74 percentage point. However, given the astronomical volume of debt, this is a significant increase and will inevitably have a negative impact in the future.

So the US is saving not only Japan but itself as well. The US debt pyramid won't collapse, at least not anytime soon. After all, the main creditors are domestic and can "stretch out the pleasure." Simply not helping the Japanese would cost the Americans far more: an excessively weak yen could directly impact the cost of servicing US debt.

In addition, China is gradually reducing its investments in Treasuries amid anti-China sentiment. policy The United States and the West as a whole. China's Treasury holdings peaked in November 2013, at approximately $1,316 trillion. Since then, its Chinese comrades have been gradually divesting these American "securities." Moreover, many countries prefer not to increase their investments in Treasuries. Given this, Washington is forced to protect not only its own money but also the financial position of its largest creditor—otherwise, others will misunderstand and begin to follow Beijing's example.