Treasury Secretary Scott Bessent has defended the US intervention to support the yen in late July, telling Senator Elizabeth Warren that disorderly yen markets could raise American borrowing costs. The yen fell below 160 per dollar on Friday, giving back part of the gains from the intervention.
Treasury Secretary Scott Bessent defended the decision to support the yen in late July, arguing that extreme volatility in the Japanese currency could push up US interest rates. He made the case in an Aug. 27 letter responding to an inquiry from Democratic Senator Elizabeth Warren, the top Democrat on the Senate Banking Committee, about the yen operation.
Bessent ties yen stability to US borrowing costs
According to the letter: "Japan is a major holder of US Treasuries," Bessent said, warning that disorderly yen markets can trigger forced unwinds that could destabilize global markets and ultimately raise borrowing costs for American families and businesses. He posted the letter on X on Friday.
Bessent declined to specify how much the US deployed in the intervention, saying it involved existing Exchange Stabilization Fund foreign-currency assets for yen. Earlier this month he had indicated the Treasury used euros instead.
Japan reported Friday that it had spent a record $96.4 billion in the past month to support the yen. The operation marked the first US intervention to buy the yen since 1998, and Japan remains the largest foreign holder of US government securities.
No credit extended, Bessent says
Warren had pressed Bessent to provide the analysis behind using the Treasury's Exchange Stabilization Fund. Bessent responded that his department had followed the fund's statute, which authorizes the secretary, with presidential approval, to deal in foreign exchanges in support of orderly exchange agreements.
Bessent said no credit was extended to Japan. Therefore, he added, there is no risk that Japan will fail to repay a debt that does not exist, since Japan owes Treasury nothing.
Yen slips back below 160 per dollar
The yen has given back some of the gains from the intervention. On Friday, it fell below 160 per dollar for the first time since late July.
Source: Economy News (Investing.com)
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