Japan and the US jointly intervened to support the yen after the Bank of Japan held its policy rate at 1%, marking the first coordinated effort to strengthen the currency since 1998. The Federal Reserve held rates at 3.50%–3.75% as US inflation remained elevated and underlying domestic demand stayed firm. Elsewhere, the forced deleveraging of AI-focused hedge fund Situational Awareness exposed the leverage and concentration behind the AI trade, as AI-related private credit exceeded $200 billion. Standard Chartered raised its income guidance on stronger wealth and fee income, while China accelerated existing policy support as economic growth and business activity weakened. Read more on the week’s key developments: 1. Japan and US intervene jointly to support yen after BOJ holds rate at 1% Japan’s Ministry of Finance purchased yen on 31 July in coordination with the US Treasury to counter excessive volatility and disorderly currency movements. Finance Minister Satsuki Katayama said Japan would not hesitate to intervene jointly again and that future operations could draw on the Federal Reserve’s Foreign and International Monetary Authorities Repo Facility. The action followed the Bank of Japan’s 8–1 decision to hold its policy rate at 1%, after which the yen remained under pressure. The operation was the first coordinated US-Japan intervention to support the yen since 1998. US participation strengthens the signal to currency markets, while the FIMA facility could allow Japan to raise dollars temporarily against its US Treasury holdings and sell them for yen without liquidating the securities. This could support further intervention while limiting disruption to the Treasury market. Its lasting effect will depend on the US-Japan interest-rate differential and expectations for further BOJ tightening. 2. Fed holds rates as US demand firms and inflation remains at 3.7% The Federal Reserve held the federal funds rate at 3.50%–3.75% on 29 July in a 9–3 vote, with the dissenters favouring a 25-basis-point increase. US GDP grew at an annualized 1.5% in the second quarter, down from 2.1% in the first. However, real final sales to private domestic purchasers, a measure of underlying demand, increased 3.9%. Headline PCE inflation was 3.7% in June, while core inflation stood at 3.3%. The weaker GDP reading did not indicate broad cooling, as higher imports and lower government spending weighed on growth while domestic demand remained firm. The Fed gave little guidance on its next move. The 30-year Treasury yield rose above 5.2% after the decision, its highest level since 2007, increasing long-term borrowing costs despite the rate hold. 3. AI financing shifts toward debt as private credit exceeds $200 billion Outstanding private-credit loans to AI-related companies exceeded $200 billion in 2025, accounting for almost 8% of the private-credit market, according to the Bank for International Settlements (BIS). The share was less than 1% in 2016. AI companies also issued $243 billion of bonds in 2025, compared with $79 billion in 2023, as rising capital expenditure reduced free cash flow and increased reliance on debt financing. The BIS estimates AI-related private credit could reach $300 billion–$600 billion by 2030, although loan pricing may understate risk or equity valuations overstate future cash flow. Higher AI export prices have benefited Korea, Taiwan, Malaysia and Singapore, while infrastructure importers face higher costs. As the effects on demand, income and inflation vary across economies, the BIS said a gradual, data-dependent approach may reduce policy errors. 4. Situational Awareness sells most of $16 billion AI portfolio after 67% decline AI-focused hedge fund Situational Awareness sold most of its roughly $16 billion public-equity portfolio to Citadel after coming under pressure to raise capital or reduce its exposure. Its portfolio value fell 67% in July, according to an investor letter, reversing part of a 439% net gain in the first half. The fund had built concentrated, leveraged positions in semiconductor and other AI-related companies. Prime brokers, including Goldman Sachs and JPMorgan, helped facilitate the portfolio transfer. Situational Awareness subsequently removed all leverage from its portfolio and was reported to retain a roughly $10 billion book comprising public equities and private investments, including its stake in Anthropic. The episode shows how leverage can intensify losses and force rapid position reductions when concentrated holdings fall and market liquidity deteriorates. It also highlights banks’ indirect exposure to the AI investment cycle through prime-broker financing, although their individual exposures and any resulting losses have not been disclosed. 5. BoE holds rate at 3.75% as energy shock divides policymakers The Bank of England said on 30 July that its Monetary Policy Committee had voted 6–3 to hold Bank Rate at 3.75%, with three members supporting an increase to 4%. Its central forecast showed inflation peaking at 3.2% in the fourth quarter of 2026 before falling below target in 2028. Under an adverse energy-price scenario, inflation would reach 4.1% in the third quarter of 2027 and economic growth would slow to 0.9% that year. The division concerns how soon the BoE should respond to the risk that an external energy shock spreads into wages, inflation expectations and domestic prices. Economic slack could limit that transmission, supporting the majority’s decision to wait for more evidence. The dissenters placed greater weight on the cost of acting too late if inflation becomes more persistent. 6. Standard Chartered raises guidance as RoTE reaches 17.6% Standard Chartered reported record first-half operating income of $11.6 billion, up 6% at constant currency, and pre-tax profit of $4.8 billion, up 9%. Wealth Solutions income increased 38% and Global Banking income rose 19%, while return on tangible equity reached 17.6%. Its Singapore digital bank Trust recorded four consecutive profitable months from March through June. The bank raised its 2026 income-growth guidance from near the bottom to around the middle of its 5%–7% range and announced a $1 billion share buyback. The guidance upgrade was supported by a broader income mix. Net interest income rose 4% to $5.7 billion, while non-interest income increased 8% to $5.9 billion, led by wealth, origination, capital-markets activity and Global Markets flow income. Credit impairment increased 33% to $446 million, driven partly by management overlays related to the Middle East conflict. 7. China’s growth slows as policymakers accelerate existing support China’s Politburo called for faster implementation of fiscal measures and stronger countercyclical support on 30 July but stopped short of announcing broad new stimulus. Gross domestic product growth slowed from 5% in the first quarter to 4.3% in the second. The official manufacturing purchasing managers’ index fell from 50.3 in June to 49.2 in July, while the non-manufacturing index declined from 50.2 to 49.0. The People’s Bank of China said on 2 August that it would maintain ample liquidity and prioritise local-government debt resolution and the restructuring of local-government financing vehicles. The measures clarify where policy support will be directed but do not address the underlying weakness in private borrowing and investment. The policy response has so far emphasised faster implementation of existing fiscal and monetary measures, with no broad new stimulus package announced. 8. Vietnam targets $205 billion in corporate securities fundraising by 2030 Vietnam approved a financial-market reform plan on 27 July aimed at expanding capital markets as a source of medium- and long-term funding. During 2026–2030, government-bond issuance is targeted to meet 60%–65% of state borrowing needs, while local-government bonds are expected to cover about 20% of local-budget borrowing requirements. Separately, the State Securities Commission has targeted VND 5.4 quadrillion ($205.6 billion) in capital raised by companies through the securities market over the five-year period. The targets reflect the scale of Vietnam’s financing needs as it seeks to reduce its reliance on bank credit. The commission estimates that the country will require VND 38 quadrillion ($1.45 trillion) in investment through 2030, while the state budget is expected to provide VND 8.5 quadrillion ($324 billion). Private and international capital would therefore need to supply nearly four-fifths of the total, making deeper equity and bond markets increasingly important to funding future growth. 9. Argentina proposes statutory ban on central-bank financing of government Argentine President Javier Milei announced on 30 July that he was sending Congress a bill to reform the central bank’s charter and prohibit it from financing the Treasury. The proposal would also change the appointment, tenure and removal rules for central-bank officials. It requires congressional approval and would amend an ordinary statute that a future congressional majority could change again. Argentina’s annual inflation reached 211.4% in 2023 before declining to 33.5% by June 2026. The legislation would place the government’s current restriction on monetary financing into law. Its durability would still depend on congressional support, subsequent fiscal policy and whether future governments retain it. The bill would strengthen the formal constraint on central-bank financing but would not by itself guarantee institutional independence or fiscal discipline. 10. Cross-border bank credit rises 11% as lending to NBFIs increases $651 billion Global cross-border bank credit increased by $1.7 trillion in the first quarter to $39.5 trillion, an 11% year-on-year rise, the BIS reported on 31 July. Credit to non-bank financial institutions increased by $651 billion, while credit to the non-financial sector rose by $453 billion. The NBFI increase was concentrated in the US, UK, Cayman Islands and Japan, while banks in the UK, US and Germany recorded the largest increases on the lender side. NBFIs accounted for about 38% of the quarterly increase, expanding banks’ direct cross-border exposure to financial-sector counterparties outside the banking system. The concentration in major financial centers identifies the immediate counterparties but not the ultimate borrowers or use of the funds. The figures show a material increase in bank-NBFI linkages without establishing how much additional credit risk banks assumed. What to watch Central Bank of Brazil policy decision (5 August), Banco de México policy decision (6 August), Reserve Bank of Australia policy decision and updated forecasts (11 August), Norges Bank policy decision (13 August), Bank Indonesia policy decision (19 August), Bank of Thailand policy decision (26 August), Bangko Sentral ng Pilipinas policy decision (27 August), G20 finance ministers and central-bank governors meeting (29–30 August) The Asian Banker Weekly Brief is a roundup of the biggest macroeconomic, industry and regulatory developments affecting banking globally.
