US Treasury secretary Scott Bessent offered a new rationale for last Friday's joint US-Japanese currency intervention, citing 1998 as evidence of coordinated interventions' power. In summer 1998, the joint intervention prompted a 5.6 per cent intraday yen rally, extending to 7.2 per cent over two trading days. However, within eight trading days the currency returned to unchanged, and within three weeks it was making new lows.

The real rally was driven by Russia's domestic debt default on August 17, which triggered the near collapse of Long-Term Capital Management, prompted three Fed rate cuts, and saw the yen rally over 30 per cent. After last week's intervention, the yen hit an intraday high of 155.5, around 5 per cent from its pre-intervention low, but has since given back some gains. The article questions whether history will repeat or if Bessent should expect the yen to only truly rally when a major exogenous shock threatens the US financial system.