Scott Bessent Defends US Intervention To Prop Up JPY — 'Very Important To Have A Stable Yen'

• Bessent said that the U.S. efforts to support the Japanese yen are more than just a market intervention.
• He added that while interventions can be useful in giving the markets a signal, ultimately it’s the economic policy that will play the determining role.
• The U.S. Treasury on Friday last week sold euros to buy yen in the first such action to support the Japanese currency in the last 30 years, first reported by The Financial Times.

Treasury Secretary Scott Bessent on Tuesday defended the U.S. intervention to prop up the Japanese yen, calling the country a “great ally” of the United States in both economic and military terms.

During an interview with CNBC, Bessent said that he believes that Japan will continue to put in place the right policies needed to get JPY to a more normal equilibrium price.

“They’re making serious efforts to stem the substantial undervaluation in their currency,” he said.

More Than Just A Market Intervention, Says Bessent

Bessent added that the U.S. efforts to support the Japanese yen are more than just a market intervention.

The Treasury Secretary also said that once the investments made by Japanese citizens, as well as their pension system, are accounted for, Japan’s debt-to-gross domestic product (GDP) ratio does not look as bad as it otherwise does.

“They’re moving toward budget discipline. They’re going to have a primary surplus for the first time,” he added.

Stable JPY Important Not Just For The US, But The Entire Region

Bessent noted that a stable JPY is not just important for the U.S., but for the entire region. “If the yen were to weaken substantially, then the other currencies will follow it. We’ve seen excess volatility in the Korean Won. Many people believe that the Chinese RMB is undervalued,” he said.

Bessent added that given the trade flows, the size of the Japanese economy and the country’s contribution to the global savings market, it is important to have a stable yen.

“The Japanese government understands that and we’re proud to stand with them in implementing their policies and help them stabilize the region,” he said.

Bessent said that while interventions can be useful in giving the markets a signal, ultimately it’s the economic policy that will play the determining role. He credited late Japanese Prime Minister Shinzo Abe’s economic policies for pulling the country out of deflation.

What The US Did To Help JPY

The U.S. Treasury on Friday last week sold euros to buy yen in the first such action to support the Japanese currency in the last 30 years, first reported by The Financial Times.

The Japanese yen hit a nearly 40-year low of 163.84 per dollar last month, according to LSEG data cited by CNBC.

President Donald Trump confirmed that the U.S. had participated in the intervention to help the yen as a token of support for Japan. “They have a weakening yen and they wanted a little bit of help, and we're always there for Japan. Japan has been very good to us,” he said while speaking to reporters aboard the Air Force One.

The Japanese yen hovered around 157.4 per dollar at the time of writing.

Meanwhile, U.S. equities gained in Tuesday’s pre-market trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was up 0.36%; the Invesco QQQ Trust ETF (QQQ) rose 1.09%; and the SPDR Dow Jones Industrial Average ETF Trust (DIA) gained 1.19%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in the ‘bearish’ territory.

Also See: Kevin Warsh's Fed Messaging ‘Was Not Defensible’, Says Jeremy Siegel After FOMC Meeting

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