Treasury Secretary Scott Bessent said the weakness of the yen has contributed to Japan’s inflation problem and raised the risk of broader depreciation of Asian currencies as he reiterated US support for efforts to stabilize the situation.
“It’s just the level of the yen that could trigger other problems or trigger competitive devaluations, which is unhealthy,” Bessent said on CNBC Tuesday. “A stable yen is not only important for the US but very important for the entire region” of Asia.
Bessent was speaking days after the US joined Japan in intervening to support the yen, which in recent weeks had dropped to the lowest in four decades against the dollar.
Asked whether the US would engage in further intervention, Bessent said that “we’re in close contact” with Tokyo and that “we will do whatever it takes to support them in a way that helps the American economy, the American taxpayer, stabilizes the global economy.”
The yen has surged in the wake of the US-Japan operations to support the currency, though the rally stalled Tuesday, trading around 157.54 per US dollar. On July 23, it sank near 164, the lowest since 1986.
The Treasury chief said part of Japan’s inflation “problem” is due to the pass-through of the weak yen — which drives up Japanese energy costs. He also said that “if the yen were to weaken substantially, then the other currencies would follow it. We’ve seen excess volatility in the Korean won. Many people believe that the Chinese RMB is undervalued.”
RMB refers to renminbi, the official name for China’s currency.
Bessent, who specialized in currencies during his decades-long hedge-fund career before becoming Treasury secretary, said that currency intervention can “give market signals,” but ultimately “it’s policy that turns it.” He said that Japanese Prime Minister Sanae Takaichi’s government is “moving toward budget discipline,” including a primary surplus.
Asked whether stabilizing the yen would require the Bank of Japan to raise interest rates, Bessent said he wouldn’t “prejudge” what it should do. He said he’s known Governor Kazuo Ueda for 15 years “and I believe that he will do what is needed.”
“It is going to require policy to follow up with the intervention, and I’m highly confident we’re going to see that,” Bessent said.
With regard to a photograph of his notepad during a cabinet meeting Friday that put purchasing yen as a “to do” item, Bessent suggested that was done as a signal. “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.
Asked about the reported US use of euros for purchasing yen in Friday’s currency intervention, Bessent said there was “close contact with our European partners, including at the central bank” and some finance ministers.
“I assured them that it’s just a reallocation of our reserves,” Bessent said. He also said it “seems to me the euro is much closer to an equilibrium price.” The issue is “really the substantial undervaluation of the yen here,” he said.
Written by: Hadriana Lowenkron — With assistance from Anya Andrianova @Bloomberg
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