The United States is increasingly focused on Japan’s weak yen and bond market because Japan is Washington’s largest foreign lender, holding more than $1.1 trillion of U.S. Treasuries as of May, according to the CFR. President Donald Trump discussed the yen with Prime Minister Sanae Takaichi last week, an exchange disclosed Friday by Japan’s finance minister, Satsuki Katayama. The yen reached nearly 164 per dollar in late July, its weakest level in four decades, and remained near 157. Japan has spent about $167 billion this year supporting the yen by selling dollars and buying yen, partly through Treasury sales, analysts estimate. Reduced demand for U.S. debt can push Washington to offer higher yields; the 10-year Treasury yield reached 5.18% on September 24, according to Federal Reserve data. Japan and the United States jointly bought yen on July 31 for the first time since 1998. Japan’s rising domestic rates are also making its bonds more attractive relative to Treasuries. The Bank of Japan raised its key rate to 1.25% on September 18, the highest since 1995, while Japan’s 10-year yield reached 3.115% and its two-year yield reached 1.975%, their highest levels in 30 and 31 years, respectively. Officials have discussed shifting state pension investments from foreign bonds, including Treasuries, into Japanese bonds. The currency issue also affects markets through the yen carry trade, in which investors borrow cheaply in yen to buy riskier assets such as Bitcoin. A stronger yen or higher Japanese rates can make those positions more expensive and force traders to sell assets to repay loans. That mechanism contributed to the August 2024 selloff, when Japan’s TOPIX lost 12% on August 5 and Bitcoin and Ethereum fell as much as 20%, according to the BIS, which estimated roughly $250 billion in carry positions entering the decline. The yen’s 3.7% three-session gain in early September has so far produced a different result, with Bitcoin remaining above $79,000. Bitcoin traded at $82,873 on Monday, down 2.3% today. Katayama has said future Japanese interventions would use a Federal Reserve lending line rather than Treasury sales, according to OMFIF.