U.S. Treasury Secretary Scott Bessent has defended the government’s decision to support the yen, citing risks to global financial stability and higher U.S. borrowing costs if the currency’s slide remains unchecked. In a letter to Democratic Senator Elizabeth Warren dated August 27 and posted on X on August 28, Bessent outlined the rationale behind the rare Treasury-led intervention to bolster the yen, which fell below 160 per dollar on August 28 for the first time since late July.
The operation, the first U.S. intervention in the yen since 1998, involved deploying existing foreign-currency assets from the Exchange Stabilization Fund (ESF) to support orderly exchange conditions. Bessent did not disclose the exact amount deployed but noted earlier this month that euros were used. Japan’s Ministry of Finance reported spending a record $96.4 billion over the past month to stabilize the yen, underscoring the scale of the effort.
Bessent emphasized that Japan, as the largest foreign holder of U.S. government securities, plays a critical role in global markets. He warned that disorderly yen movements could trigger forced unwinds of Japanese holdings, destabilizing markets and ultimately raising borrowing costs for American households and businesses. ‘Japan is a major holder of U.S. Treasuries. Disorderly yen markets can trigger forced unwinds, which could destabilize global markets and ultimately raise borrowing costs for American families and businesses,’ Bessent stated.
In response to Warren’s inquiry about the legal and financial basis for the intervention, Bessent cited statutory authority under the ESF, which ‘expressly authorizes the secretary, with presidential approval, to deal in foreign exchanges in support of orderly exchange agreements.’ He also clarified that no credit was extended to Japan, stating, ‘Japan owes Treasury nothing. There is therefore no risk that Japan will fail to repay a debt that does not exist.’
