US Treasury Secretary Scott Bessent has sounded the alarm on Japan’s sliding yen, warning that the currency’s weakness has fueled domestic inflation and could trigger a domino effect of depreciation across Asian currencies.
The yen has fallen to its weakest levels since 1986, prompting the United States and Japan to coordinate direct intervention in foreign exchange markets.
The intervention and what’s behind it
The coordinated effort took place over August 1-3, 2026, with both countries purchasing yen to prop up its value. A Reuters photographer captured a notepad during a cabinet meeting showing Bessent’s plan in stark terms: “Buy Japanese Yen (JPY) $5-10 bil.”
Bessent publicly acknowledged the yen’s “substantial undervaluation” on August 1, backing Japan’s own efforts to restore some balance to its battered currency. The former hedge fund manager, who was confirmed as Treasury Secretary in January 2025 under President Trump, knows the yen trade intimately. He reportedly profited from yen-related positions during his time in finance.
The weak yen has made imports significantly more expensive for Japanese consumers and businesses, feeding into inflationary pressures that the Bank of Japan has struggled to contain.
Why crypto markets should care
When the yen weakens, it creates pressure on other Asian currencies to depreciate competitively. Bessent’s warning about “broader Asian currency depreciation” is essentially describing the early stages of a competitive devaluation cycle.
The yen carry trade, where investors borrow cheap yen to invest in higher-yielding assets elsewhere, has been a significant driver of global liquidity. When the yen suddenly strengthens due to intervention, those carry trades unwind rapidly. The last major carry trade unwind in August 2024 sent shockwaves through equity and crypto markets alike. A $5-10 billion intervention creates real risk of another disorderly unwind.
Regional contagion risks
Bessent’s concern about cascading depreciation isn’t theoretical. When one major Asian currency falls, trade competitors face a choice: let their own currencies decline to stay competitive, or maintain value and watch their export sectors suffer.
The carry trade unwind risk alone makes this worth monitoring closely. When trillions of dollars in leveraged positions depend on yen stability, a Treasury Secretary publicly flagging regional depreciation risks isn’t just commentary. It’s a warning flare.