Japan's yen-buying currency market intervention may not be sending tremors through the U.S. 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.
Experts reckon yen purchases by the Bank of Japan at the behest of the Ministry of Finance are funded by dollar deposits held by the BOJ, which are later replenished by the sale of very short-dated U.S. Treasurys or even bills.