Bessent says U.S. backed Japan’s yen intervention to help stabilize Asia

Treasury Secretary Scott Bessent revealed on Tuesday that the U.S. collaborated with Japan's initiative to strengthen the yen, as the currency's depreciation posed a potential risk to market stability across Asia. Bessent emphasized during an appearance on CNBC's "Squawk Box" that a weaker yen could lead other countries to devalue their currencies too, citing instances of volatility in the South Korean won and speculations about China's yuan being undervalued.

Bessent stressed the significance of having a stable yen, given the size of the Japanese economy and its substantial contribution to the global savings market. He affirmed that the Japanese government shared this concern, and the U.S. was proud to back their policies to stabilize the region. The coordinated intervention to support the yen marked a rare effort by the U.S. to aid another major currency, reflecting Washington's worries that prolonged yen weakness might exacerbate inflation in Japan, weaken other Asian currencies, and destabilize global markets.

The Treasury Department utilized euro reserves in the U.S. and invested the earnings to purchase yen as part of the coordinated operation. Bessent clarified that the euro sale was merely a reallocation of existing reserves, assuring European officials. However, he noted that the purchases could only alleviate volatility in the short term and would require subsequent Japanese policies to address the factors driving the yen's decline.

Bessent disclosed that the intervention stemmed from what he described as a "substantial undervaluation" of the Japanese currency, and both countries had been maintaining close communication. Washington believed that Japan would implement policies aimed at normalizing the yen's level. Bessent cautioned, however, that intervention alone would not dictate the currency's trajectory; it was ultimately policy changes that would influence the currency in the long run.

He indicated that while the U.S. could signal market movements through intervention, it was Japan's policy decisions that would ultimately determine the currency's future direction.