Bessent defends yen intervention, warns of higher US borrowing costs
By Aboki Forex —
US Treasury Secretary Scott Bessent has defended the decision to support the yen in late July, saying extreme volatility in the Japanese currency could push US interest rates higher.
In an Aug. 27 letter to Democratic Senator Elizabeth Warren, Bessent said Japan is a major holder of US Treasuries and that disorderly yen markets could trigger forced unwinds.
Why it matters
Bessent posted the letter on X on Friday. He declined to say how much the US deployed in the intervention, stating only that it involved existing Exchange Stabilization Fund foreign-currency assets for yen. Earlier this month, he indicated that the Treasury had used euros.
Japan reported Friday that it had spent a record $96.4 billion in the past month to support the yen. The operation marked the first US intervention to buy the yen since 1998.
Bessent's defence
Warren, the top Democrat on the Senate Banking Committee, had pressed Bessent to provide the analysis behind using the Treasury's Exchange Stabilization Fund. Bessent said his department had followed the ESF's statute, which expressly authorises the secretary, with presidential approval, to deal in foreign exchanges in support of orderly exchange agreements.
He also dismissed concerns about any obligation to Japan. "No credit was extended to Japan," Bessent said. "Japan owes Treasury nothing. There is therefore no risk that Japan will fail to repay a debt that does not exist."
The yen has given back some of the gains from the intervention. On Friday, it fell below 160 per dollar for the first time since late July.