U.S. Treasury Secretary Scott Bessent warned in a letter that excessive volatility in the Japanese yen could trigger forced unwinding of positions across global markets, potentially destabilizing financial conditions and raising borrowing costs for American households and businesses.
The letter, dated August 27 and posted on X on August 28, highlighted the risks posed by disorderly yen movements. Bessent drew parallels to past interventions, noting that the U.S. Treasury’s Exchange Stabilization Fund (ESF) was used last year to stabilize Argentina’s peso during a period of acute illiquidity, preventing a broader regional crisis.
The warning comes after a rare joint currency operation by Washington and Tokyo on July 31 to support the yen. The intervention followed the yen’s slide to a 40-year low of 164 per dollar, before recovering to around 155.20. The yen has since approached 160 per dollar again, underscoring persistent pressure on the currency.
Bessent’s remarks reflect growing concerns about the yen’s trajectory and its potential spillover effects. The Treasury Secretary emphasized the importance of managed crises, stating that the best-managed crisis is the one that never occurs. His letter was addressed to Senator Elizabeth Warren, with Kevin Warsh, the Federal Reserve Chairman, also referenced in the context of broader U.S. monetary policy discussions.
The yen’s recent fluctuations have drawn attention amid broader concerns about global financial stability. The Bank of Japan has faced increasing pressure to address the currency’s weakness, which has contributed to imported inflation and complicated policy decisions for Japanese authorities.
