US Treasury Buys Yen for First Time in 28 Years Amid Global Market Concerns

The US Treasury Department intervened in currency markets for the first time in 28 years by buying yen, citing concerns that a sharp drop in the yen could lead to higher interest rates in the US. According to Secretary Scott Bessent, the intervention was meant to prevent a disorderly move in the yen market from triggering forced liquidation of investment positions and destabilizing global financial markets.

Bessent wrote in a letter to Senator Elizabeth Warren that Japan is a major holder of US Treasuries and that a steep drop in the yen could lead Japanese investors to sell US Treasuries, which would increase borrowing costs for American households and businesses. The Treasury Department used the Exchange Stabilization Fund (ESF) to buy yen, citing Section 5302 of US law as the legal basis for the operation.

The intervention marked a significant move by the US government in currency markets, with Bessent stating that there was no new appropriation from Congress and no credit was extended to Japan. He added that 'Japan owes nothing to the US Treasury,' and that 'there is no risk that Japan could fail to repay a debt that does not exist.'