U.S. Treasury Secretary Scott Bessent has defended Washington’s recent intervention to support the Japanese yen, stating that extreme currency volatility could trigger forced liquidations and destabilize global markets.
Bessent made the remarks in an August 27 letter responding to Democratic Senator Elizabeth Warren, published on X on August 28. The letter followed Japan’s reported spending of a record $96.4 billion over the past month to prop up the yen, which fell below 160 per dollar on Friday—the lowest level since late July.
The Treasury Secretary said the intervention used foreign currency assets from the existing Exchange Stabilization Fund (ESF) for the yen. Earlier this month, he indicated that the Treasury had also used euros in its operations. Bessent emphasized that the move was taken under the ESF statute, which authorizes the Secretary—with presidential approval—to engage in foreign exchange operations to support orderly exchange arrangements.
Bessent noted that no credit was extended to Japan and that the country owes nothing to the U.S. Treasury, eliminating any default risk. He argued that the yen’s volatility posed risks to U.S. Treasury markets, as Japan is the largest foreign holder of U.S. government debt. Such disruptions, he warned, could ultimately raise borrowing costs for American families and businesses.
Japan last intervened to buy yen in 1998. The yen’s recent decline below 160 per dollar marks a significant drop from levels seen in late July, prompting renewed scrutiny of currency stabilization efforts.
