U.S. Treasury Secretary Scott Bessent has defended America’s role in Japan’s recent yen support operation, citing risks to global financial stability and U.S. borrowing costs. In an August 27 letter to Senator Elizabeth Warren, Bessent said disorderly yen markets could trigger forced unwinds that destabilize global markets and ultimately raise borrowing costs for U.S. households and businesses.
The operation marked the first U.S. intervention to buy yen since 1998. Japan is the largest foreign holder of U.S. government securities, and Bessent emphasized that no credit was extended to Japan. ‘Japan owes Treasury nothing,’ he wrote, adding that there is ‘no risk that Japan will fail to repay a debt that does not exist.’
Bessent stated that the Treasury followed the Exchange Stabilization Fund’s (ESF) statute, which authorizes the secretary, with presidential approval, to deal in foreign exchanges to support orderly exchange agreements. He declined to disclose the exact amount deployed by the U.S., noting it involved existing ESF foreign-currency assets in yen—earlier in the month, he indicated the Treasury had used euros.
The yen fell below 160 per dollar on August 28 for the first time since late July, reversing some of the gains from Japan’s intervention. Japan reported spending a record $96.4 billion to support the yen over the past month. The correspondence was initiated by Senator Warren, who had requested details on the Treasury’s analysis behind using the ESF.
