- Japan spent a record 15.4 trillion yen ($96.5 billion) in foreign exchange markets over the past month to support the local currency, according to Finance Ministry data.
- BOJ entered the market to buy yen on July 30 and 31, including with the U.S., as the yen neared 164 per dollar.
- Bessent defended the intervention in an Aug. 27 letter to Senator Warren, warning that extreme volatility in the yen could lead to higher U.S. interest rates.
- Disorderly yen markets can trigger forced unwinds, which could destabilize global markets and ultimately raise borrowing costs for American families and businesses.
- The size of the intervention shows Tokyo's resolve to pull the yen away from four-decade lows, as currency weakness threatens profits at Japan's heavyweight exporters.
U.S. Treasury Secretary Scott Bessent defended Japan's unprecedented $96.5 billion intervention to stabilize the yen, which has plummeted to four-decade lows. He warned that extreme volatility in the yen could lead to higher U.S. interest rates, affecting American families and businesses.
Japanese authorities spent a record 15.4 trillion yen in foreign exchange markets to support the local currency, reflecting Tokyo's determination to combat currency weakness that threatens profits for major exporters and raises import costs, particularly for energy.
Bessent noted, “Disorderly yen markets can trigger forced unwinds, which could destabilize global markets and ultimately raise borrowing costs for American families and businesses.” The intervention, which included coordinated efforts with the Bank of Korea, aimed to bolster the yen after it hit a low of 164 per dollar.4
The yen initially strengthened to 155.20 by August 3 but has since stabilized around 159.50. Bessent emphasized that Washington would do “whatever it takes” to support Japan's efforts, highlighting the potential for competitive devaluations if the yen remains undervalued.
To reassure markets, Washington suggested that Tokyo could utilize a COVID-era Federal Reserve backstop for major central banks, indicating a strong commitment to stabilizing the yen amidst global economic uncertainties.
“The intervention, which included coordinated action with the Bank of Korea, helped lift the yen from near 164 to as strong as 155.20 by August 3. Bessent also said Washington would do 'whatever it takes' to support Tokyo's effort, citing risks of competitive devaluations.”
