US Treasury Steps In to Support Japan's Struggling Yen

The US Treasury Secretary Scott Bessent's notepad at a recent Cabinet meeting revealed a striking item on his to-do list: 'Buy Japanese Yen (JPY) $5-10 bil.'

This extraordinary action aimed to support the beleaguered Japanese currency, which had fallen to a 40-year low. Speaking with reporters, President Donald Trump acknowledged that 'They wanted a little bit of help, and we're always there for Japan.' However, the US action was not entirely altruistic.

The price in Japan of US exports would widen the US trade deficit if the yen continued to weaken, making Japan's exports cheaper and US exports more expensive. Additionally, a constant weakening of the yen could impact US interest rates as Japan might sell US Treasurys it holds to finance a currency rescue.

According to Joseph Foudy, a clinical professor of economics at New York University's Stern School of Business, 'The intervention has injected some caution into the speculators who were betting against the yen,' but 'it's unlikely to be enough of a response to keep this from happening again.'