Bessent's Yen Intervention Risks Global Market Turbulence

Japanese yen turbulence has continued to threaten global financial markets. US Treasury Secretary Scott Bessent and Japanese government officials are walking a tightrope as they try to raise the value of the yen against the dollar and stabilize it.

The issue of the yen's value gained international prominence earlier this year when it continued to fall against the dollar, despite threats from Japan's Ministry of Finance to intervene against short sellers. Bessent became concerned that Japan would start selling dollars to halt the yen's decline, which could boost inflation by increasing prices for imports.

So, Bessent organized a joint intervention with Japan under which the country would obtain money from the US Treasury Department's Exchange Stabilisation Fund to back the value of the yen without having to sell US dollars. The unusual set of arrangements involved the sale of US-held euros to purchase yen and were aimed at propping up the yen without destabilizing global markets.

The joint intervention lifted the value of the yen marginally, but it soon fell back again. Bessent has since been insisting that Japan's central bank, the Bank of Japan (BoJ), raise interest rates to provide a long-term prop for the yen.