If Japan exhausts intervention slush fund, Treasuries may wobble

Vulnerable currency: A man walks past an electronic screen displaying the current yen exchange rate against the U.S. dollar and the graph showing its recent movement in Tokyo. Japan is the world’s largest overseas holder of US Treasuries. — Reuters

JAPAN’S yen-buying currency market intervention may not be sending tremors through the US bond market just yet, but that calm could be disturbed if Tokyo gets drawn into a drawn-out battle to prevent the exchange rate from weakening much further.

Central banks wanting to stop their currencies depreciating too much or too quickly essentially intervene by selling dollar-denominated assets in their international reserves and buying back their own currency with the proceeds.