Bessent Cites Yen Instability as Reason Behind US Intervention
US Treasury Secretary Scott Bessent has explained why the US intervened in the foreign exchange market to buy yen last month. In a letter to Democratic Senator Elizabeth Warren, Bessent cited the potential for sharp instability in the yen market as the reason.
The intervention was aimed at preventing 'disorderly conditions' that could lead to forced position liquidation and destabilize global markets. This, in turn, could drive up borrowing costs for American households and businesses, according to Bessent.
Bessent emphasized that Japan owes nothing to the US Treasury, and therefore there is no risk of Japan failing to repay a non-existent debt. The Treasury complied with relevant laws governing the Exchange Stabilization Fund (ESF), which enables the Secretary to conduct foreign exchange transactions with the President's approval.