Japan's currency is falling hard, and the U.S. has stepped in to prop it up — bad news for Americans, because the fix means more printed money and more inflation.

• Investors borrow yen cheaply at 1% and swap it for dollars to earn 3.75% or more, which keeps pushing the yen down.
• Japan imports most of its energy, half its food, and most industrial raw materials, so a weak yen makes everything more expensive there.
• Japan can't just raise interest rates to fix it — its debt is 250% of the size of its economy, so higher rates would wreck the government's budget.
• Japan holds $1.1 trillion in U.S. government IOUs and threatened to sell, which would send U.S. interest rates jumping; Treasury Secretary Scott Bessent talked them out of it.
• The deal instead lets Japan pawn those IOUs to the Fed for up to $60 billion in freshly printed dollars.

Outlook: Japan's small rate hike expected in September won't close the gap, so the yen trade keeps running, and the Fed now has one more reason to leave U.S. rates alone.