Treasury Secretary Scott Bessent highlighted the Japanese yen’s decline as a growing concern. He noted that the weak currency has worsened inflation in Japan. It also raised concerns about broader instability in the region. During an appearance on CNBC on Tuesday, Bessent warned of problematic consequences. The low value of the yen could lead to triggering competitive devaluations across Asian economies. He described this as harmful to financial stability.
Japan’s currency hit a 40-year low of 164 to the US dollar on July 23, marking its weakest point since 1986. As of Tuesday, the yen was trading at approximately 157.54 against the dollar, showing some recovery but still lingering near historical lows.
Bessent’s Views on Policy and Market Signals
Policy and Leadership Focus
While Bessent acknowledged that market signals play a role in currency movements, he emphasized that long-term stability requires solid policy decisions. He pointed to Japan’s leadership under Prime Minister Sanae Takaichi, who is pushing for greater budget discipline. This includes a focus on achieving a primary budget surplus as part of broader fiscal reforms.
Bessent expressed confidence in the leadership of Bank of Japan Governor Kazuo Ueda. He said he has known Ueda for 15 years. He believes Ueda will implement necessary steps to address the situation. When asked if the Bank of Japan might need to increase interest rates to stabilize the yen, Bessent said he wouldn’t speculate about future actions. He expected policy to align with recent interventions.
Bessent assured European partners that this was simply a reallocation of US foreign reserves and not a sign of a larger economic shift. He added that the euro, in his view, appears to be closer to a balanced value.
In a move that generated attention, Bessent wrote “purchasing yen” in his notepad during a cabinet meeting. He did this to signal his commitment to the intervention effort. “I just wanted to make sure that all the reporters looking on, over my shoulder, also knew the symbol ‘JPY’ for the Japanese yen,” he said during the interview. He explained his intention to convey the message clearly.
Regional Currency Volatility
Bessent also highlighted signs of volatility in other regional currencies. He mentioned the Korean won and stated that many observers believe the Chinese RMB, or renminbi, is undervalued. However, he maintained that the most urgent issue remains the yen’s significant undervaluation, which poses the greatest risk to regional financial markets.
Bessent reiterated that the US remains committed to supporting Japan in its efforts to stabilize the yen. He stressed that the joint intervention was done with the full understanding of European partners. The goal was to ensure economic stability not only for the US but for the entire region. His remarks came during a critical period. Global markets remain sensitive to shifts in major currencies.
Long-Term US-Japan Coordination
The Treasury Secretary also underscored the importance of long-term coordination between the US and Japan to address the underlying causes of the yen’s weakness. He noted that while short-term interventions can provide some relief, the focus should remain on implementing the structural policies necessary to restore confidence in the Japanese currency.
As the yen remains near historic lows, Bessent’s statements signaled continued US involvement in regional currency markets. His remarks also hinted at a broader awareness of the interconnectedness of Asian economies, where the yen’s trajectory could ripple across the region, affecting trade and investment flows.
His comments reflect the administration’s commitment to maintaining global economic health and mitigating risks posed by volatile currency movements.