Bessent: Yen Support Prevents Higher US Interest Rates

Treasury Secretary Scott Bessent defended the US government's decision to support the yen in late July, stating that extreme volatility could lead to higher US interest rates. In an Aug. 27 letter responding to Democratic Senator Elizabeth Warren’s inquiry, Bessent said disorderly yen markets can trigger forced unwinds, which would destabilize global markets and raise borrowing costs for American families and businesses.

Bessent noted that Japan is a major holder of US Treasuries and that the US had used existing Exchange Stabilization Fund foreign-currency assets to intervene in the yen market. He emphasized that no credit was extended to Japan, and therefore, there is no risk that Japan will fail to repay a debt that does not exist.

The operation marked the first US intervention to buy the yen since 1998, and Japan has spent a record $96.4 billion in the past month to support the currency. The yen has given back some of its gains from the intervention, falling below its previous level on Friday.