Masahiko Loo, State Street strategist, highlighted a pivotal shift in US-Japan currency policy, signaling reduced reliance on selling US Treasuries to defend the yen. The $35-$50 billion intervention scale risks market instability, particularly with the 10-year Treasury yield near 4.68%, a 12-month high. Loo emphasized the FEMA repo facility as a tool to avoid direct Treasury sales, leveraging pledged bonds for dollar funding.

He predicted USD/JPY will test 155 as a critical level, down from 164, with volatility metrics and bond spreads reflecting market confidence. A sustained drop below 164 could validate the intervention’s impact, while a rebound might signal temporary relief.