Bretton Woods Revisited: US Intervenes in Yen Market

US Treasury Secretary Scott Bessent's surprise intervention in July to prop up the yen has sparked concerns about currency wars and protectionism, echoing the 1930s playbook on tariffs used by the Trump administration.

The US Treasury sold USD 5-10 billion worth of yen, citing that it is undervalued, but economists argue that interventions are ineffective in the long run and only lead to market pressures returning.

Japan's Prime Minister Sanae Takaichi has shown no willingness to address underlying fundamentals by raising interest rates or implementing a fiscal contraction, which would require the US to lower its own interest rates and issue less debt.

The yen has already begun to fall again since its initial surge, and experts predict that more interventions will be needed to achieve the desired exchange-rate effect, but markets will treat them with increasing skepticism.