Treasury Secretary Scott Bessent is defending Washington’s rare intervention in the Japanese yen, arguing that the transaction did not create a loan to Japan and therefore carries no repayment risk.
The dispute follows an Aug. 13 letter from Sen. Elizabeth Warren questioning how the Treasury used its Exchange Stabilization Fund, or ESF, during last month’s coordinated U.S.-Japan currency operation. Warren argued that taxpayers could face losses if Japan failed to repay Treasury. Bessent rejected that premise, saying Treasury simply exchanged foreign-currency assets already held by the ESF for yen.
“No new congressional appropriation was involved,” Bessent wrote, adding that Japan owes Treasury nothing because no credit was extended. The ESF can hold euros and yen alongside other reserve assets, according to Treasury data.
Japan’s Intervention Reached Nearly $97 Billion
The U.S. action formed part of a much larger Japanese effort to stabilize the currency after the yen fell beyond 163 per dollar, near its weakest level in roughly four decades.
Japan’s Ministry of Finance disclosed on Aug. 28 that foreign-exchange intervention between July 30 and Aug. 26 totaled ¥15.3993 trillion, or roughly $97 billion at recent exchange rates.
Coinpaper’s earlier coverage of the joint yen intervention noted that Washington and Tokyo acted together for the first time since 1998. An earlier estimated ¥8.45 trillion operation, worth about $52.8 billion, had already highlighted the scale of Japan’s attempts to stop the currency’s slide.
Why Washington Cares About the Yen
Bessent’s broader argument is that yen instability is not purely a Japanese problem. Japan is one of the largest foreign holders of U.S. Treasuries, so a disorderly currency move could force investors to unwind positions and potentially push American borrowing costs higher.
That risk also extends to global markets through the yen carry trade, where investors borrow cheaply in yen to finance positions in stocks, bonds and other assets. A sudden yen rally can force those trades to unwind quickly, amplifying volatility.
The immediate market impact has faded. USD/JPY closed near 160.07 on Aug. 28, after the intervention initially pushed the pair substantially lower.
That leaves the core policy question unresolved: intervention can slow a disorderly currency move, but lasting yen strength may ultimately require changes in interest-rate differentials, inflation expectations and Bank of Japan policy rather than repeated foreign-exchange purchases.