Welcome back to Real Vision. I'm your

host Ash Bennington. Today I'm joined by

Weston Nakamura, founder of Across the

Spread. You can find his work on

Substack. Weston, it is great to have

you back with us once again on Real

Vision.

>> Great to be back. Nice to meet you,

Bennington-san.

>> Nice to meet you, Nakamura-san. Listen,

this is a huge story we're here to talk

about today. I think one that's people

have here in the US have been following,

perhaps confused by. It is a complicated

story. It is so great to have you

because I know you follow this very

closely. You're coming to us from Tokyo.

It's about 10:00 at night there where

you are right now. It's great to have

you on the ground. Great to have you

with us here to unpack this important

macroeconomic story.

>> What sto- What story would that be?

>> I believe it would be about the Japanese

yen.

>> Oh, oh right, right, right. Sorry. Yes,

yes.

Uh yeah, so I mean, it's funny because

originally we're this was, you know, you

guys reached out to me to talk about the

Bank of Japan.

And

and how you said at the time, like,

you know, you guys do understand that

there's a Bank of Japan meeting in

between

the time we were talking about, you

know, uh

filming this

uh and and the actual film date. So,

just in case

something happens, just like, you know,

give me some time to kind of put my head

head around it. Okay, well, I had no

idea

what that potential thing might be would

be

this US-Japan joint coordination into

uh

FX

I don't know how to say it, FX meddling.

Uh

foreign exchange markets intervention.

JPY meddling.

I didn't know that that was going to be

what the thing in between potential

thing might be, so.

>> Hey, listen, Weston, before before we

dive into this, I want you to just set

the context about because you're in

Japan, you think about this all the

time. You got a deck we're about to walk

through here, but set the broader

context about where the Japanese economy

is. Uh this is something Americans as

you as you of course know don't follow

closely. You're American of course uh

living in Japan, but walk us through the

broad context of what has been happening

with the Japanese economy, what the

issues on the ground are, and what

people in Japan think about what's been

going on let's say the last 5 to 10

years cuz there's a lot here to unpack.

>> Sure. So, um

fir- first of all,

I would say that from a market

standpoint

until Korea

the Kospi index and you know, like the

uh memory semiconductor names

started to just go vertical uh for the

better part of I say last you know, the

2 years or so and also year-to-date um

to start off the year the like Japan

equity markets like the Nikkei had been

the outperformer.

Um

and strangely that was happening at a

time when the Bank of Japan had

you know, sort of I don't want to say

start tightening. Start to increase

their policy rate uh out from negative

to zero now to a actually having a you

know, a positive interest rate. Um

and you also have inflation in Japan

happening. These are all kind of like

multi-decade sort of thing um

you know, phenomenon happening. As well

as

the so you have the the equity markets

uh like are ripping to multi-decade

highs. You have uh the yen getting

crushed to multi-decade lows. You have

JGB yields to multi-decade highs. You

have policy rates to multi-decade highs.

All that kind of thing. You have like uh

wages wage increases, you know, highest

in like multi-decade. So, all of these

sort of multi-decade

superlatives are are happening

simultaneously. Um and you know,

underpinning that really is

I would say inflation

that that inflation phenomenon and the

the turn in the sort of public sentiment

that like

I you know, genuinely that that the

inflationary mindset has been broken in

Japan. And so that in itself is

unprecedented.

>> Well, I'm so glad you set the stage

here, particularly in the context of

what's been happening for decades those

trends. Let me ask you this just really

quickly before we hit the deck. What's

the What's the mood on the ground been

in Japan in terms of participants in the

economy? I'm talking about workers here.

I'm talking about families. What's the

general overall sense of where the

economy has been and where it is right

now?

>> Uh bad.

Like again because of because of

inflation. So you have wages going up,

but you have inflation outpacing that.

So you have real wages just getting

crushed

to again multi-decade lows. And the

what's pernicious about that is that

yeah, indeed nominal wages have been

increasing. So like Japan Inc.

it gives them you know, the ability to

say we increased wages as opposed to you

know, having pressure on them to to do

so. So you know, there there isn't any

additional step that could be done about

that. But the overall sentiment is very

is very poor because once again

this is a society that

for like generationally has been

it's just an underlying assumption

prices don't go up. They go down. So the

longer you wait to buy something the

cheaper it'll be. They don't know how to

behave in an inflationary environment.

Nobody does really anywhere like in the

developed world, but at least like you

know, people kind of

now like after immediately after COVID

like they have that under the belt in

the Europe and the United States and all

that. And so if there's a second bout of

inflation, obviously it's going to be

bad, but kind of the the general

behavior is the recent precedence for

that within people's own experiences.

Japan isn't like it doesn't

know how to behave in an inflationary

environment. Um and

you know, you have also politically, you

have the Takaichi administration who

came in with an just an absolute like

massive massive win. Um

you know, where you're where you're

talking about approval ratings that had

stayed in the 70 80% range for months

and months after um

her

uh you know, her her election. She's

kind of single-handedly pulled her party

out of the dumps.

>> This is prime just Prime Minister

Takaichi that you're referring to.

>> Uh I am. Uh she and she forged a very

good relationship with President Donald

Trump, which is uh quite a feat in and

of itself. And in addition to that,

Prime Minister uh Takaichi appointed

Satsuki Katayama uh Finance Minister.

She's the first female Finance Minister

in Japan's history. She has forged a

good relationship with Scott Bessent,

her counterpart at uh Treasury, which is

going to be very relevant to this

discussion. But the overall um

public support around the Takaichi

administration has been enormously

positive until until very recently where

her approval ratings have fallen down

significantly sharply. Now, they're

still actually above, you know, they're

net net above uh you know, 50%

but and and higher than most leaders uh

around the world, not that says as much,

but um

but there are people are losing faith in

the she got elected because because of

uh cost of living crisis policies that

were promised. However,

those are kind of

you know, they're not they're not really

um

coming through or coming through fast

enough and so she's starting to lose uh

faith in that, meaning the the is

starting to lose faith in the one

institution

uh or one ray of hope left

is what that would

would be. So the the overall sentiment

is is not good.

I would also say too that people, you

know, in Japan

Japan is households are basically

sitting on over 50% of their financial

assets are sitting in cash which is

over one quadrillion yen.

So that's 1,000 trillion yen.

That cash is getting that those yen

literal like yen stuffed in mattresses

and in bank accounts and buried in in

holes in people's backyards and whatnot.

That cash that had been saved up over 30

years of deflation is now

getting burned in terms of their

purchasing power.

And so they're starting to see like

being holding cash is no longer a safe

haven

move or a prudent thing to do. Rather

you are actually now concentrated long

the worst performing currency in the

last like four years and one that is now

apparently needs assistance from the

United States in order for it to stop

declining. So people are like kind of

thinking about what to do with that

cash. It's irresponsible to hold cash

and to be to be concentrated cash and so

they're allocating that to things like

equities and all that foreign equities.

That is turn in turn it's basically a

capital flight that is starting to be

underway. Should that really take hold,

you're talking about, you know,

the largest savings pool

capital flight out of Japan.

That's going to have massive

implications on, you know, global asset

prices and all that too. And so that is

yet to that's kind of like the like a

crack in a dam

and right now they're trying to like put

like chew a piece of gum into those

cracks

in the dam and and hold back that

potential

uh

flood.

Uh

Successfully or not, we'll see, but

>> Listen, I am so glad uh that you were

able to do that, to set the table, to

provide the context, to talk about what

the sentiment is, what the mood is, what

the tone is. And by the way, this isn't

something you're reading in The Wall

Street Journal. This is something you're

literally seeing on the streets that you

can feel uh in terms of the view that

people actually have where you are

living. Invaluable view. Let's talk a

little bit about what happened uh last

week. Let's kick off this story. Um

begin wherever you like to begin.

Obviously, many people heard about this

story um with the uh with the Reuters

photo that we're I think we're going to

talk about. But, talk us through what

happened last week and bring us up to

the present.

>> Sure. So, um

So, dollar-yen has been on, let's say,

since 2022.

Dollar-yen has been the worst major

performing currency for um

the last several years consecutively.

>> And don't worry, we've got plenty of

charts.

>> Yeah. So, at the time,

to start 2022, so let's just go over

like the the the weak yen, the

background of the the weak yen in of

itself. So, if we look at some charts,

So, this is basically what happened in

the last in two trading days uh ending

last week, okay? And I'm starting that

chart, the one that you're looking at

right now, July 30, July 31. That's

starting from

Mr. Kevin Warsh, Chair Kevin Warsh and

his bizarre press conference um of the

July FOMC meeting to New York FX close

on Friday. And you'll you'll see this

massive plummet uh in in dollar-yen.

But, before we get to that, so that's

that's kind of the main story.

>> the way, this shows that dollar

strengthening and weakness for those who

aren't familiar with these charts.

>> This this shows dollar dollar weakness.

Yen strength.

>> Yen strength, yeah. Inverted, yeah.

>> You're you're you're you're so used to

USD/JPY

Yeah. you're What you're trying to say,

Ash, is that dollar yen is quoted as

>> Yeah.

>> you know, USD/JPY going up means yen

weakness, USD/JPY going down means that

That's what you're used to doing.

>> We've been doing this for We've been

doing it 20 years, man. I mean, you

know, it's hard to

>> Because you've been saying it for 20

years, that's why you said what you

said. That's such a such a tell such a

symbiotic. It's kind of hilarious. So, I

hope I hope more of these kind of

organic slips of your viewers come.

Okay. So,

what's behind what's behind the

>> It's like It's like It's like driving on

the opposite side of the road, man. It's

It's hard for my brain.

>> Uh it is it is indeed. So, like All

right. So, the the question is like

about the yen itself. Now, is this

Well, um it's actually a good that you

said that because a lot of people will

say when USD/JPY is going up or when

it's going down, particularly when it's

going up though, you know, that could be

dollar strength, that's not not

necessarily yen weakness, um and and so

on and so forth, right? So, I'm just

going to show you, no, this is yen

weakness. Um that's by and large been

going on over the over the broader

This is a chart of basically on the same

percentage axis you have dollar yen and

DXY, the dollar spot index, which is

mostly the euro and all that, but it's

basically the US dollar uh you know,

basket. And as you can see,

you know, over the last several years,

more or less,

you know,

dollar yen and the DXY index have been

moving percent for percent in tandem, if

not definitely directionally in tandem,

but at you know, percent for percent as

you can see, right?

>> Well, yen is a component there of DXY.

>> Right. A small a smaller component. It's

like 6% like the euro, and then it's

like high teens for the yen, then the

Brit the British pound and and all that.

But nonetheless, it does represent the

dollar broadly.

Um so, if you actually look at this

though, this chart, you'll see that

dollar yen diverges sharply higher in

like kind of that first part of the

chart, um whereas DXY kind of stays

flat, right? And that's in 2020

four is it? Yeah, 2020

uh four.

Uh and when that happens, that's clearly

yen weakness, right? Because the dollar

spot index has is not really moving

higher, but dollar against the yen is

moving sharply higher. And when that

happened, that's the last time you saw

uh bouts of yen intervention of of yen

intervention from the Ministry of

Finance in Japan on on two occasions.

That first one was in April end of April

uh beginning of May of 2020 four when it

shot through 152 cap and immediately up

to uh 160. And by the way, that happened

uh on the back of

Bank of Japan Governor Ueda

giving a

yet another horrendous performance of

like no conviction in sort of no

credibility given to him in his rate

hiking uh and therefore yen

strengthening or yen supportive

um monetary policy.

Um not that he's supposed to be you

know, targeting exchange rates, but

nonetheless, you know, if if the Bank of

Japan is not being seen as credibly

hiking their interest rate higher in the

face of inflation, then that's going to

spill over into further yen weakness.

And so, that's what he did. He literally

was like, "You know, currency problem?

Well, whatever do you mean?" And so,

that's why dollar yen went from 155

handle to 160 in two trading days. So,

the mini- Minister of Finance steps in,

they do that first intervention. The

second one the second uh red line of

intervention that you see there, that is

in July of 2024. That's the thing that

leads to eventually

August beginning of August Black Monday

um in which

the yen sharply sharply accelerates its

upward trend and blows up the world um

in you see it like in the minus 13% day

in in the Nikkei and all that. Okay, so

that when when it diverges from when

dollar yen diverges sharply higher from

DXY, that's clearly yen weakness, and

that's when Ministry of Finance has been

stepping in to intervene and support uh

JPY uh to the upside or dollar yen to

the downside. And they do that by

smacking dollar yen down,

um, essentially

selling tens of billions of US D at the

market and crushing the exchange rate

down.

Now, if you look at,

uh, from the middle of that chart

forward

>> that, of course, this is the confusing

part, right? And that means when you see

dollar JPY, you'll see that rising.

So, it's the inverse. It's measured the

chart dollar dollar yen is measuring the

dollar against the yen. So, it's the

reverse for the yen.

>> Right. But, but what the Ministry of

Finance does, uh, when when the Japan

Ministry of Finance intervenes in the

yen, what they're doing is they're

selling USD.

Right? They're You could say they're

selling USD and buying JPY, but Japan

has plenty of JPY. It doesn't

It doesn't need to buy much of it. It

needs to sell down USD JPY, literally.

It needs to sell that, um, down. And

they do that by uh, selling, you know,

uh,

dollar assets, dollar, you know, reserve

assets, and we'll get to that in a

minute. But, if you look at back to this

chart, from that middle point, that line

in the middle, that's liberation day.

That's when, by the way, that's when my

the the the day that my daughter was

born. And now I would say like,

"What have you done to the world? Like,

you've destroyed trillions in financial

markets. What have you brought upon us?"

Uh, April 2nd, 2025. April 2nd, 2025 was

when

Donald Trump

brings out that Cinco was born and

shows, uh, everyone's sort of, uh,

punishment of tariffs.

>> This is the tariff show.

>> You'll see that the dollar, measured by

the dollar spot index, the DXY index,

has been more or less kind of flat.

You're right, like range-bound on and on

the floor. But, you'll see the yen

dollar yen

just completely diverge and shoot

upwards to new,

you know, multi-decade highs.

>> The major flip here for people to get

their heads around is that this is a

change in direction for what has

historically been happening for all of

our lives for the last 20 years, which

is one of the reasons why it's so hard

to talk about because the historical

problem in Japan has been deflation and

that is what the yen intervention has

been. This is a flip.

>> Yeah, so, you know, um it up until 2022

yeah, the yen was kind of had been

well, I actually up until uh 2013 of

Abenomics kicking you off. Uh the yen

had been rather strong, you know, like

like 80 dollar yen like 80, you know,

90-ish. Um and then Abenomics kicks in,

gets dollar yen higher into the, you

know, uh

100 handle then 120 and now we're and

that was purposely, you know, done um in

order to sort of make Japan more

competitive in the in different in

different ways. Uh Japan Inc. and all

that. Um it's to spur investment to, you

know, uh galvanize animal spirits and

all of that. So, that was like a

desirable thing for dollar yen to go

higher. Now though, it's out of the like

the

dollar yen going higher or the yen, you

know,

weakening is

undesirable. It's happening at a pace

that's undesirable. It's happening at a

level going to levels that are

undesirable and it's what most

undesirable of all is that it's not

within the control of policymakers um

and financial authorities um Bank of

Japan Ministry of Finance and all that.

So, if you see like this this this weak

dollar uh weaker yen that's the the kind

of uh the title of this particular slide

is that dollar has been weak the broadly

speaking since liberation day, right? If

you want to call it dedollarization or

flight from the world, whatever it is.

Doesn't matter what the reason is. The

fact of the matter is DXY has been

basically flat on the floor um

since liberation day. But, the fact that

the it the uh that dollar yen is going

up while that's uh that dollar flatness

on the floor has been going on in tandem

means that the the yen is getting

crushed. That's what that means, right?

So, it's not a dollar weakness story or

So, dollar yen going up is certainly not

like a a strong dollar story at all. No,

it's

a yen that is even weaker than the

already weak dollar.

Uh if you look at this chart, this is

basically yen purchasing power.

This is like, you know, the the black

line is the actual exchange rate itself,

but if you look at it from like a

purchasing power actual kind of maybe

fundamental real world sort of

measurement of like

what the

this piece of paper is the yen can

actually buy. You can see that that's at

multi-decade lows as well. So,

fundamentally, it's also, you know, uh

at

um you know, the the yen purchasing

power and value uh is and is is

weakening.

If you look at this, okay? People say

Well, the the reason that the yen is

getting crushed, the reason that dollar

yen is is going higher is because of

policy spread differentials. In other

words, the Fed has a higher fed funds

rate, the Bank of Japan has a very low,

you know, zero to low uh

uh policy rate, and that differential,

the spread between that, that's driving

dollar yen higher. Okay? That may or may

not have been the case. So, so if you

look at this chart, the top panel is is

literally the fed funds rate and the

Bank of Japan policy rate, you know, on

the same scale. And you'll see that, you

know,

the Fed ripped rates higher in the face

of COVID, and then after that, they

started to reduce rates. Bank of Japan

had begun to increase interest rates.

So, initially, the first first half of

this chart, the bottom the bottom part

of that chart is the actual spread

itself. The fed funds rate minus the

Bank of Japan policy rate. That's the

spread. So, you'll see that because the

Bank of Japan did not increase interest

rates when the Fed ripped rates higher

from 500 basis points, um you know, in

starting from 2022, that policy rate

spread went from nearly zero. In In

words, essentially this almost having

the same actual policy rate, you know,

Fed funds Fed funds and and BOJ to, you

know, about 5% difference differential.

And when that happened, dollar yen had,

you know, moved up accordingly. But

then,

that policy rate spread

began to flatten out because the Bank of

Japan wasn't moving on uh

rate hikes and the Fed and the Fed was

done with rate hiking. And then, after

that, the policy rate spread began to

narrow because the Fed had been

decreasing their uh Fed funds rate at

the same time that the Bank of Japan had

been increasing. So, you're getting it

from both directions, right? So, the

policy rate spread is now at basically

like cut in half from peak. Yet, dollar

yen is still marching further higher.

So,

the fact that, you know, or this notion

of the

Bank of Japan needs to hike rates and or

if the Fed cuts rates, that will help

support the yen is clearly not the case.

For many years, it's those things

detached.

On And then further, if you want to look

at nominal yield spreads,

here's the 10-year

uh

US Treasury yield

minus the 10-year JGB yield uh spread as

well. Okay, so 10-year uh US Treasury

yield minus um minus 10-year JGB yield.

And you'll see that at first and then

dollar yen overlay. And you'll see, you

know, for a very long time,

those two would correlate because if

there is a higher yield in the US and a

lower yield in the in in Japan, then

investors will favor,

you know, investing in a higher yielding

10-year US Treasury

that is providing providing much more of

a, you know,

fixed income yield or return than JGB

uh would for for a similar duration.

>> And so that which will which will weaken

the yen, net effect.

>> Right.

However, uh since again since like 2025

or so or 2020 you know mid 2025 and

certainly 2026

you'll see that that spread has also

dramatically decreased because JGB

yields

mostly from the JGB yield side have been

shooting up very

sharply higher.

And so now there is like less of a

spread a difference in these two yields

and yet once again dollar yen is not

is not following along. It's on its own

path higher. So this doesn't apply

either.

>> Okay. So So why don't why do we see that

weakening of the yen in relation to that

to the to a

an interest rate differential that

should provide exactly the opposite?

>> Well, actually you're

getting to my you're getting to the the

core of what's

what's happening right now with the

United States and and all that So So let

me let me just So right now before we

before I answer your question this this

slide right here

I just want to show that like

if you look at it from a you know a a

nominal yield spread perspective

10-year

US Treasury minus 10-year JGB yields

have now that spread has now gone back

to 2020 to levels. In other words back

when dollar yen was like 115 118-ish.

Okay. So that's how much of like yield

spread compression has gone on and yet

dollar yen is at 40-year highs. So

clearly what my point is that like

central bank policy spreads nominal

yield spreads at the longer end

you know what whatever maybe those

things don't apply anymore. The yen is

just on

structural weakness regardless of those

things.

Despite those things. Okay. So

um

this brings us to the 48 hours

of the last two

uh last two trading days of of last week

starting from, the you know, that one

too.

>> Right.

>> Uh okay. Oh, wait. I'm sorry. You asked

me So, why what's why is the week

Yen happening despite all of this? Why

like why have has the Yen basically

diverged from this, right?

>> Right.

Um

so there's, you know, there's plenty of

kind of academic reasons uh and I would

say like there's not one single reason.

I would say that there are different

factors that have different levels of

weighting

uh in contribution of this, but there's

no single reason. So, at any given

moment I could, you know, I could give

you like what the thing is for

for this week, but there isn't really a

single sort of thing. What I will say is

that recently what you're seeing is

JGB yields have been climbing across the

curve from two-year JGB yields to to 40

uh year JGB yields. They're all just

going upwards. And normally normally

what we should happen is higher yields,

you know, domestic yields should mean

that it would strengthen the Yen because

that is attractive the higher yielding

JGB is going to bring money back home

from, you know, uh Japanese investors

who have who are the largest foreign

investors in fiscal fixed income in the

world.

If there's a yield that is attractive

enough in Japan

uh without having to take on currency

risk, they're going to repatriate back

home and that's going to push, you know,

yields down.

That's not been the case. You're seeing

both JGB yields and dollar Yen or euro

Yen or whatever it is increasing both in

lockstep tandem with one another. What

that is is again capital flight. That is

the selling of JGBs to get the hell out

of Japan fixed income. Not get not, you

know, invite in

uh repatriation, but it's just further

selling by domestics out of their

natural long Yen holdings. So, that's

one of the key reasons that you're um

seeing this

uh yen weakness that's defying all these

other charts.

>> That's the long structural factor that

you're talking about there. Right there.

That That's the idea that the that as

that capital flies, uh you see that the

yen weakening. I guess the one

correlation that's held, the one thing

that's behaved exactly as you would

expect, uh would be US intervention in

the yen creates that chart right there

over 2 days, which is that you see uh US

dollar weakening yen strength, which is

uh USD/JPY decline right there.

Yeah, that's all That's all correlation

still holds at least.

>> That's the core In the correlate If you

want to use that word term correlation,

the correlation of when a non-economic

government actor steps in out of nowhere

and suddenly blasts tens of billions of

dollars of USD at the market, then yeah,

USD will go down. That correlation does

exist.

>> [laughter]

>> For that time being. For that time

being. Doesn't mean that it's going to

uh persist there after. That's That's

the issue. Um

>> And that's that's skepticism that you're

expressing, the idea of whether or not

this can hold, whether or not uh markets

ultimately in the longer term will

invert that despite uh the fact that

there has been massive intervention.

That I mean that's Is that the the

expression of the risk that you have

here?

>> Not not in the longer term. That's the

luxury that

that we don't have like in the immediate

term.

Will it will it hold? You know, that's

that's what the the question is.

>> I always appreciate your cynicism,

Weston.

>> It's sometimes it's not cynicism, it's

it's the reality, right? But um But like

longer term is like we don't have like

you know, when when

if there's um

you know, like an

an earthquake that's that's

hitting and then like a tsunami on its

way, well, yeah, you can think about

longer term, but you probably need to

like think about like get the hell out

of the way of the tsunami if, you know,

first like. So, I'm just going in order

of like

uh

chronology, if not sort of priority.

>> Okay, so what's the risk here, Weston?

What do you see potentially happening

next? How do you frame what those risks

might be?

>> Okay, okay, well, um

Let me just So, let's get into what

happened what's what's been happening.

This this major announcement, this major

I don't know, event.

I don't know what what the right noun

is. What would you say the noun is?

Thing that happened with

>> You're talking about the intervention.

>> Yes, I'm talking about specifically the

US involvement of partnership to

coordination.

Whatever you want to call that.

I'll talk about that.

Okay.

Um

Before we like So, what I want to do is

I want to explain what that what

actually happened and all that. But,

before that it's very necessary for me

to have to

sort of dispel a lot of

I don't want to call it nonsense and

garbage, but for lack of a better term,

nonsense and garbage out there.

Because

and it's this is not to like, you know,

you know, like

disparage like other media outlets or

anything like that. The reason that I'm

going to do what I'm about to do is

because

it is very necessary for to in order for

you to understand what's actually

happened and how this whole

Japan

US kind of

public alliance to support the yen, how

that all came about. The media has a

massive role in in all of this, okay?

So,

Um wait, let me just show uh

the

I got to go out of order here. Okay,

this is going to be

uh I'm I'm I'm not picking on Hedgeye.

I'm not Hedgeye, sorry. Zerohedge. I'm

not picking on Hedgeye uh Zerohedge. Uh

not that I consider them a real, you

know, media like financial media outlet

anyway, but

the term confirmed has been thrown

around so like egregiously liberally

throughout the this entirety of the last

few trading days, okay? Saying that, you

know, some authority some some, you

know, US or Japan authority confirms

that intervention has taken place or

confirms like XYZ or whatever. And

because that gets then re-circulated by

other media outlets

when indeed nothing has actually been

confirmed because I'm defining confirmed

as

actual official public statement made by

only a handful of people. Secretary

Bessant, Finance Minister Kateriyama,

the you know, President Trump,

uh you know, uh

PM uh

Takaiji,

and or maybe like the the central banks,

but they're not really relevant either.

Otherwise,

what you're seeing is

media outlets saying

making a gigantic headline and then

instead saying like underneath that, "S-

Unnamed sources say, according to people

familiar with the matter." Okay? Sorry,

that's not confirmation. Okay? But then,

if you take that and run with it as a

like a definite thing that happened,

that's

very dangerous because you're not acting

on actual information. Even if it

happens to be true,

you know, you have to go by what is

actually being said by officials or at

least be aware of what is, you know,

kind of allegations or what is like

based off of a foundation of unnamed

sources and what has actually been said,

you know, tactically by by the uh

officials, okay? So, if you look at this

example, this is the most egregious one

of all all that I saw. This is a

headline. "Bank of Japan confirms

intervention. Fed con- conducted rate

check." Now, that title alone, if that

title, just the title, the headline

itself, if that were true, wow, because

the big story is would not even be the

intervention itself. The big story there

within that headline would be the fact

that the Bank of Japan, who in this

context is an unimportant actor. The

Bank of Japan is not the decision-making

body. They are the order-executing body.

The decision-making body to intervene in

foreign exchange is the Ministry of

Finance. They make the decision and they

tell the Bank of Japan, basically as

their broker, "Hey, execute this order."

So, according to this, if the Bank of

Japan is confirming yen intervention,

that means they're going behind the back

of the Ministry of Finance to what, like

publicly state

uh a very highly sensitive confidential

information?

For For For what reason, right? So, that

title in itself is is nonsense that

people don't know what to talk about.

But, oh my god, the Bank of Japan, they

confirmed yen intervention. Let's see

what Let's see what they say. The first

two words, Nikkei reports. Okay, so now

you went from the Bank of Japan

confirming something to now you're

talking you're reporting on what the

Nikkei is reporting. So, that already

kind of cancels out what your headline

is saying. The next

three, four words are that

that market participants learned. Okay,

so now we've gone from the Bank of Japan

confirming that yen intervention took

place to now

that anonymous market participants,

whoever they may be, have learned

something and that they've told they

relayed that to Nikkei. So, that's a

massive massive difference, okay? The

Bank of Japan confirmed to the Nikkei

has reported about market participants

that something said, okay? But, the the

the

Unfortunately, that's not the the worst

of it. The worst of it is if you look at

this very last line of the very first um

few words of the very last line.

You read that for me, Ash, please.

>> Like the I can't read it. It's It's way

too small on my screen. No, I can't read

it.

>> it it it it ends with this same article

ends with the following, quote,

"Obviously, there is no confirmation."

Really?

Obviously? Well, then why in the hell is

your headline Bank of Japan confirms and

then you say obviously there's no

confirmation within the same article.

Now, not everybody is like putting out

like this level of egregious nonsense,

but unfortunately, the bigger like

media, you know, ecosystem is actually

doing this. They're

putting out very grandiose headlines of

the

Fed confirmed, the New York Fed. Again,

the New York Fed is not

the decision-making body. They're acting

and working on behalf of Secretary

Besson and and the Treasury Department.

They're just the order executing body,

but the New York Fed has confirmed that

they sold that the, you know, the United

States has sold

uh euro yen cross um on Friday and and

so on and so forth, right?

>> Let me let me let me just jump in here

cuz I want I want to give I want to give

you my my

uh understanding of what you're saying.

So, first of all, you're very upset

about the media and imprecision and

stuff.

>> love that.

>> I read this I read that to mean that

maybe that that with that headline was

saying was that was what had been

reported uh by Nikkei, obviously one of

the huge outlets uh in Japan, but the

bigger point that I take uh from from

what you're saying here is be very

careful uh about what you read because

it's relatively murky. There has been a

lack of confirmation from uh the

Ministry of Finance, which is the

official body here and and understand um

that you may not uh be getting exactly

the whole story because there's

obviously a language barrier here. It's

very complicated uh and and things may

not be what they appear to be. And if I

take you correctly, you're saying that

this intervention uh may not have

happened at Well, it may not happen at

all in terms of the actual market

execution.

>> Yeah, so that's exactly right, that last

part you said. So, just to correct the

record from from what what your your

accusations are to me

is that

is that Look, I don't care. I don't care

what the media reports on. Like I don't

I'm not this is not for like

journalistic like, you know, uh uh

morals or what or whatever the hell it

is, okay? Like this is fine. They could

do whatever they want to, right? Freedom

of press this means you could freedom of

printing fine. So,

what I'm the reason that I'm saying that

this is significant to markets and to on

understanding this is what you just

said, which is that this sort of um

this like

grabbing onto a headline or, you know,

whatever be the and then regurgitating

that having like the the broader media

ecosystem like regurgitate things, that

actually then solidifies that to become

a reality such that it actually has

pushed Finance Minister Khatiwada and

Scott Bessent to have to make the

statement of yes, indeed, we have uh

joint coordinated uh uh you know, um uh

forex intervention. Because if they

don't do that in the face of this

onslaught of media

accusing them or, you know, making this

this sort of reality in people's minds

and the market uh participants' minds.

And if they stay quiet, then that's a

problem. So,

this created what we're talking we're

we're about to talk about, okay? That's

why it's important. And also it's all

obviously important because we have to

again understand what actually has

happened, what has not actually

happened. And I'm going to say right now

what has not been actually confirmed.

And if you look through I'm going to go

through like kind of like step-by-step,

but the United States has not actually

been confirmed to have

acted as in

uh put their hands directly into foreign

exchange markets themselves. Okay? Joint

coordination does not mean that the US

is doing the exact same market activity

and market execution as the Ministry of

Finance in Japan is, okay? It just all

Currently all All means is that there is

a coordinated effort, but that doesn't

mean equivalent actions being taken. So

far, what we know is from a confirmation

standpoint, confirmation being defined

not as what the Nikkei's learned, that

market participants have learned about

Wawa. Now, confirmation being actual

Ministry of Finance officials, Finance

Minister Kanda saying

the only side that has actually done any

actual market intervention is the Japan

side, and the best inside has not. And

so far as I'm concerned, the United

States has her hands clean so far, okay?

Um

that's and that's that's a very critical

difference, wouldn't you say?

So

that's the reason it matters.

>> Okay. And but this idea of coordination,

it means that they are certainly

speaking about it and they are

conferring. That's the Is that the

broader point?

>> That is a broader point. So what it get

it gets to the the start of what is

actually happening. So now we can

actually talk about what is actually

happening.

Um and so cuz we have to dispel what was

you know, potentially not happening.

Now, if you look at this, this is a one

piece of the

the media that Look, I got to I need to

point out uh

three media outlets in specifically um

in this because they're the ones who

kind of really shape this.

>> This is the Reuters This is the Reuters

photo.

>> Yeah, you probably have seen this like

in this this kind of went viral, right?

This over the shot This was from Friday

um this over the shot like Camp David

photo of uh Scott Bessent's notepad

to-do list uh during a cabinet meeting

in which he writes to do, buy Japanese

yen, parentheses JPY, 5 to 10 billion.

5 to 10 billion dollars. Now obviously

to me, I thought that this was nonsense

to like begin with. Like, it's almost to

a point where like when I saw this, I

was like, "Oh my god, Bessent, like this

is like embarrassing." If I were if I

were advising Scott Bessent, I would say

like, "Dude, do not do this." If if he

says like, "I'm going to go into the

meeting and I'm going to write down a

pad like, you know, buy Japanese yen."

I'd I'd I'd like, "Sir, with all due

respect, don't do that. That's a really

stupid idea. And people are going to see

right through it and they're going to

show see how like kind of nonsense it is

and you're going to lose credibility.

Well,

I was wrong. Bessent was right. Bessent

knows the media. They took this and they

kind of the way that Reuters had

unveiled this was like as if this was

some sleuthy photographer that taken

picture of like this, you know, and and

leaked this out and and clearly he's

like this is like a bait, right? And

then he comes out and Bessent came out

on CNBC um after this weekend on on

Monday saying like, "No, of of course

that was like a like that was me trying

to bait the the media. They they took

the bait." and all that. And and it's

very obvious because of, you know, like

Scott Bessent is a currency trader for

40 years at hedge fund. He doesn't need

to write Nobody writes Japanese yen out

like I've never written that out. And he

doesn't need the reminder of what

Japanese yen is by putting in

parentheses what the ticker is,

the JPY part, okay?

And much less put it like on a to-do

list. Like really? Like you're in the

middle of like Iran war, you have

That's all you have to do?

And if it's a broader to-do list, then

that means that you need to write that

down in order to remember it because

then that shows that how unimportant it

is. Either way, the whole thing The

reason that I'm pointing this out,

however, is not to show Reuters

ridiculousness. They've already done

that themselves. I don't need to do

that. Not that that's something that I

would have any interest in either. What

I'm showing is that the read on this is

wrong, okay? The read on this from

people who recognize that this is Scott

Bessent purposely planting this so that,

you know,

the the general consensus understanding

is that this shows that Scott Bessent in

the United States is very serious about

their commitment to

uh supporting the yen. That's what this

shows. That's what the signals. I would

say quite the contrary. What this shows

is Scott Bessent's

um let's just say non-desire or his

his unwillingness to actually step into

markets and actually conduct

foreign exchange intervention activity.

Because his hope was this was in the

middle of the day. This is at like 12:00

p.m. Eastern. His hope was that this

like Reuters whoever would see this and

then they would

immediately rush to print this and then

markets would see that, react to it,

front-run it, and hopefully the

dollar-yen downwards move would happen

without him having to lift a single

finger of his own and actually, you

know, uh execute in markets. That's what

the aim was for him for for this, right?

It but what it again, what it shows is

his desire to not actually do any of it

himself. If this move is to done this

this this act of this theatrical act is

done so that he doesn't have to actually

do anything himself. Okay? So, that's

that point.

>> You're like the You're like the Lewis

Black of the Japanese yen.

>> [laughter]

>> Yes, exactly.

That is pissing me off because blah blah

blah blah blah. So, the

other two elements, okay, that matter

here are Nikkei and the Financial Times.

The Nikkei matters because the Nikkei is

the one that every single like sharp

move down in dollar-yen, the Nikkei has

been basically putting out immediately

like articles saying "Jap- Japan carries

out yen-buying intervention." Like kind

of definitively, right? But again, if

you look at what they actually say in

like, you know, July 31st,

the title "Japan carries out yen-buying

intervention as UA uh executes rate

check." Sounds very definitive. Then it

says "Japanese government intervened in

foreign exchange markets to buy yen and

sell dollars on Thursday while US

authorities executed a rate check, a

move often seen as precursor to blah

blah blah." Uh the yen surged from

below, okay. Then

uh

the the final part I'm including here is

"Japanese government um conducted

large-scale yen-buying, market sources

said." Okay. The second one, you know,

the US carried out a joint forest

intervention on Friday for the first

time since 2011.

Um, you know,

this is again government sources said on

Sunday. And then, it says Japanese Vice

Minister of Finance Satsuki Katayama is

expected to explain the intervention and

other steps against currency weakness on

Monday morning. Okay, so again, these

are officials are also working on a

possible joint US uh

statement. So, this was done before that

actually was

announced. The the fact that they're

going to be having an announcement, let

alone the announcement itself. So, these

are sort of the things that pushed the

announcement itself. Um, then the third

the last one is Financial Times.

Financial Times is the one who said that

uh definitively that the yen range yen

range had taken place from the US side

on the euro yen EUR JPY cross, not

dollar yen. Um Again, Federal Reserve

Bank of New York undertook the unusual

move of conducting a sale of euros to

buy yen on behalf of the Treasury,

according to three people familiar with

matter. The sales were conducted through

Goldman Sachs, Morgan Stanley, according

to two of those people. Now, look at the

bottom uh right corner of this slide

that I included. I just want to remind

everybody, the Financial Times is owned

wholly by Nikkei.

Okay? So, what that means is that the

the three media organizations that I

just mentioned, Reuters with a stupid

like, you know, over the shoulder like

that that aside, the two that have been

driving

the headlines and therefore the

not just the markets, but the actual

policy makers' decisions and actions are

Nikkei and Financial Times, but that

really is one media organization.

Okay? I'm not saying that they

cross-colluded. I'm also not saying that

they didn't. But, it's important to

remember that these are the same

uh you know, organizations. They're

they're not competitors. They're not

going to check each other. More likely,

if if anything, they're going to be or

acting as one. So, my point is that

everything that people know and are

basing their assumptions on are coming

from one media source, which is the

Nikkei and its subsidiary the Financial

Times, citing unnamed sources and all of

that. That is

and then they're making these grandiose

sort of assumptions and theses about

this is Plaza Accord part two or

whatever it is. Whatever your like

assumptions or or whatever your kind of

conclusions or your your commentary or

your analysis is, if it's based on this,

it's not based on any foundation of

reality or anything firm. It's based on

sources familiar with the matter as

reported by the Nikkei. Hey, so that's

the very critical difference that needs

to be pointed out.

So, fair so

>> Ash

Yeah, so let's let's get to I know I

know you've got a

some some slides here at the end of the

deck for your long-term view. Uh you've

got some charts and you've got uh you've

got some uh some things that I think

would be helpful for people to

understand in terms of your view. Uh

let's bring those up.

>> Well, actually let me let me just

quickly go through what actually was

said and then the the the statement

themselves. So, if you look at this, you

look at this part,

what's the actual joint coordination

statement that came out? Okay? So,

August 3rd at 8:00 a.m. Japan time.

Uh before right before like, you know,

uh

Japan market open um equity market open.

These came out simultaneously side by

side from Ministry of Finance and and

Treasury Secretary Scott Bessent. And

basically what they're saying is

th- this is what the actual news is,

okay? But, if you look at this

carefully,

this is what I've underlined here,

Japan Ministry of Finance purchased the

yen in coordination with the US

Department of Treasury. That's what

they're definitely saying. The Japan

Min- uh Ministry of Finance purchased

Japanese yen.

In coordination with US

you know, uh the United States, that

does not mean that the United States did

the actual purchasing themselves, okay?

If you look at what Scott Bessent says,

Friday's coordinated foreign exchange

actions, okay? Not

the United States uh actual intervention

itself. They're saying their coordinated

foreign exchange actions counter

disorderly yen interventions. And then

he finally says we strongly support

Japan's decisive market and monetary

steps to correct the substantial

undervalue

you know undervaluation of the yen. So,

if you put those together, nowhere in

that is there any even official

uh statement saying that the United

States has done anything in actual

markets. It definitively says it that

Japan does. So, we know what it looks

like in writing when you know, one of

the uh

when a when an official government does

take actual action markets.

But, the fact that that's totally

missing

from the US side on from both sides of

the statements shows that the United

States has yet to confirm or say

anything about their actual market, you

know, execution themselves. The United

States so far has its hands clean from

actual market intervention. That's not

what the general consensus assumption

is. And that needs to be understood as

like that's incorrect for for one to

assume.

>> Yeah, and your your point is that the

word coordinated is doing a lot of work

here in terms of that what that what

that might mean uh could be interpreted

very broadly. It might just mean in

coordination, meaning they're the two

sides are in contact as this is

happening.

>> Exactly. Or just the release of this

tweet itself could be could be

coordination.

Um so, what they're what they've

basically announced is that

they are essentially going to

uh have Japan Ministry of Finance use

the Fed FIMA program, FIMA. And what

that is is it's a facility that was like

a COVID era facility that's that's

rarely used, in which holders of US

Treasuries, governments, you know,

uh can basically like pledge their as

collateral their Treasury holdings in

order to get

US dollars, right? So, the problem is

is that first of all, why did Scott

Bessent do this? Why is this happening

in the first place? It's happening

clearly the the

you know, the from American perspective

obviously it's has nothing to do with

like wanting to help Japan. They don't

they don't care to

they don't want to see Japan like suffer

anything, but they don't really

it's you know, it's everyone's looking

out for their own interests as they

should. So is Japan for that matter.

Why so why is Secretary Bessent now

getting involved in this supporting the

yen? It's not supporting of the yen,

it's supporting of or defending the US

Treasury market, purely. That's what

that's for, okay? Because Japan is the

largest foreign holder of of US

Treasuries, and so if they need US

dollars in order to sell and sell down

dollar yen, they are going to have to

sell their US Treasuries in order to do

so, and that is a problem for Scott

Bessent. So, it's not like so why like

why did this occur?

If you look at

this slide, I'll I'll show you. This

occurred because of US Treasury market,

especially at the long end, you know,

kind of go going haywire, and for

Japan to to prevent Japan from

potentially selling US Treasuries in

order to raise USD to hit the market

down. If you look at this, this is

actually January of this

this year, 2026.

The New York Fed for the first time,

this kind of came out of nowhere, this

is the first steps of US involvement in

this. They conducted a rate check, which

is when the New York Fed goes around and

you know, calls up the private sector

banks, you know, like the institutions

and just tells like, "Hey, what's give

me a price quote on dollar yen or

whatever." And that's a precursor to

potential actual activity market

activity intervention that that occurs

you know,

subsequently. So, they actually did this

in January after right after a Bank of

Japan

another, you know, useless Bank of Japan

Ueda meeting where he was unconvincingly

hawkish. And so, you saw dollar-yen

actually fall sharply after that because

that was a kind of the first thing that

happened. But, if you look at US

Treasury yields at the time, that's when

US Treasury yields were were sharply,

you know, were on their way higher.

That's when Scott Bessent was starting

to, you know, get very concerned about

US Treasury yields and not

dollar-yen and whatsoever. And so,

that's why he actually apparently

initiated this. It wasn't Japan, it

wasn't Tokyo calling Washington saying,

"Hey, can you get the New York Fed to do

a rate check?" No, it actually came from

his side to apparently allegedly. So,

with that in mind

>> me let me let me let me ask you this

question cuz we we a lot of this I'm

curious to know what your long-term

outlook is because there's a lot a lot

of complexity here as you as you pointed

out, a lot of ambiguity, perhaps a lot

of misunderstanding particularly in the

reporting. What's your long-term

outlook? You've already expressed

questions about whether or not the

intervention can be successful in

ultimately supporting the yen.

What's your long-term outlook here? What

should people look for?

>> Uh I think that

well, the implications are

if the

if the US is basically So, right now

the US has yet to actually

uh

enter the

foreign exchange markets themselves

directly, okay?

Um and they're they would like to keep

it that way for whatever reason. It's

either because of, you know, market

integrity or whatever it is um

or probably more likely so, they don't

want to entangle themselves in this

this never-ending

forever war against

JPY short sellers, right? Which is what

Japan has involved themselves in.

Um I would be looking for if the US ever

actually does that. Again, they have yet

to do that, but um

mainly what this would mean is if the if

Japan has to use

this FEMA facility in which they are

taking their US Treasury holdings and

they're repoing it over to the US and

getting USD in exchange. What that means

is that those Treasury holdings are

cannot be sold because they're being

held at, you know, in custody of of

America. What that also means is that if

if this facility becomes a regular part

of or a necessary structure in order to

cap dollar yen from going higher,

um you know, as that, you know, facility

continues to get used, then what that

would mean is that Japan's

purchasing of

of US Treasuries

also

becomes, you know, interlinked with

that. In other words, Japan is holding

US Treasuries or buying US Treasuries,

um

if they're if they're doing so for

purposes of yen intervention because

they need collateral to further borrow

USD to keep to keep doing this, that

structurally creates demand for US

Treasuries, especially long-dated US

Treasuries, from Japanese government.

And so that's essentially what Scott

Bessent has has

has engineered here,

uh quite cleverly, if, you know, should

that be the case. Um and it also means

that

it kind of puts Scott Bessent in a

massively powerful position of over the

Japanese financial authorities in which

he can say, "Listen, I am essentially

bailing you out or I'm I'm helping you

out here." Yes, like, you know, you can

argue that the Japanese government is

has the leverage because they can blast

the US Treasury market, but it really

isn't the leverage that belongs to to

the US side. And so Scott Bessent can

essentially say,

"I'm bailing you out right now, but you

have to fundamentally

like strengthen the yen on your own.

That means Bank of Japan rate hikes need

to happen successively, quickly,

definitively, and all that. That means,

you know, you probably might have to cut

down on fiscal spending or get the

fiscal house in order. It gives him

a massive amount of power over Japan

fiscal and monetary policy. So, if you

thought that like Japan monetary policy

was not independent because it belong,

you know, is under the control of the

Japanese government, well, this

potentially kind of hand it over to the

United States government.

So, like

massive implications uh should this

facility continue to be used.

>> All right, Weston, so what's the

outlook? What happens next?

>> Well, what happens next in the short

term, like 150 the dollar yen 155 is is

kind of a floor. Um longer term, right?

I guess

if you're asking me do I think that this

is going to work, if this is going to

successfully cap dollar yen for the long

term, or if it's going to essentially uh

not,

I would lean towards the latter. I would

think that I I still think that dollar

yen 200 in the longer term

is the more likely outcome rather than

this being the start of a, you know,

decades-long strengthening of the yen.

And the reason is just very simply

because, first of all, dollar yen 200

sounds like a crazy figure, but it is

only 40 handles away, um and those kind

of like a 40 yen had

increment is how if you look at this

chart, dollar yen has actually made 40

yen increments uh uh upside, you know,

runs before. This would just be yet

another one. So, this there's historical

precedence for this. And each time, by

the way, people that went dollar yen was

at 80, 120, impossible. Okay, and then

120 hit. Then one, you know, 160,

impossible. Then we're 160. So, 200 is

it possible? Of course, it's possible.

Um but the reason is because, again,

the United States is not has not

committed to actual market intervention,

okay? And if they and the reason I

suspect that they're avoiding that is

because should this not hold, should

they fail, or should they abandon it all

together, this

joint cooperation, this FEMA program,

all of that kind of stuff, then dollar

yen could, you know, blast higher and if

they had

uh bought yen essentially

at these levels,

then it doesn't allow for them to fail.

So, what they're doing by not actually

buying JPY and then having to incur an

actual loss, not just a P&L loss, if you

want to call it that, uh but an actual

like uh credibility loss, they're

avoiding

their actual

buying of JPY, selling of USD

because there's this

They It's because Scott Bessent

uh currency trader Scott Bessent has a

view probably that or at least a hedge

that like

this is not permanent and this is

dependent upon Japan having to uh change

fundamentally,

you know, the the structure of what is

making the yen so weak. And as long as

those things are in place,

um dollar yen is on an autopilot, you

know, or or not dollar yen, just the yen

general is on autopilot downward decline

because of structural reasons. And so,

left unattended, you know, dollar yen

would have already hit 200 if not for

these kind of yen intervention uh caps

at 152 and 160 and all that. That would

have already happened anyway. And so,

all like do I have faith in this

particular policy versus the other ones?

This one not being so different from

what has already been in place or

already? Not particularly. I would think

that over the long term,

you're going to look, you're going to

see dollar yen 200 instead of this being

the top of, you know, USD/JPY or the

floor for the yen going forward for the

last for the next decade.

>> I always appreciate your passion.

>> Uh thank you.

>> [laughter]

>> I I um my my wife would disagree, but um

But what I what I'll say is My final

point is that currently as it stands

right now, it's not as big of a deal as

people think like as as to what has

already occurred. However, the

it does open up a pathway to leading to

massive sort of implications on not just

a market level, but on a geopolitical

you know, who controls what uh, levers

sort of level.

So.

>> Weston, always a pleasure when we get to

do this, man. It's always fun.

>> Yeah, thanks a lot thanks a lot for

having me. Thank you for thank you for

letting me

give give me a you know, give me me an

outlet to rant.

>> [laughter]

>> Right then. Weston Nakamura.

And of course just want to get the name

back in here. Founder of Across the

Spread and you can find that on

Substack.

>> Thanks a lot, Ash.

>> Weston, thanks for joining us. Thanks

for watching. Thanks for listening. Have

a great day, everybody.

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