Scott Bessent led the US side of a joint intervention by the United States and Japan to strengthen the Japanese yen, with the US Treasury selling euros to buy the currency in what marked the first coordinated action to support the yen in almost three decades. The move pushed the yen from almost ¥164 to the dollar, its weakest level since 1986, to about ¥158.
A photograph of Bessent's handwritten instruction during the operation read "buy Japanese Yen (JPY) $5-10 bil." Bessent previously traded against the pound in 1992, a period associated with the Bank of England's sterling crisis, and against the yen in 2013, while employed at George Soros's investment firm.
Donald Trump said the United States had been "always there for Japan" and pointed to "financial benefit" as a factor behind the action. The Bank of Japan has kept its policy rate at 1 per cent, and investors have expressed concern that the pace of increases has not kept up with inflationary pressure. Japan plans to draw on a Federal Reserve repo facility, a mechanism that could allow it to obtain dollars without selling US Treasury holdings.
Reaction among market strategists was mixed. Chris Turner, global head of markets at ING, characterised the operation as a return to an era of foreign-exchange activism. Adam Posen, president of the Peterson Institute, questioned whether currency intervention alone could sustainably defend the yen, drawing a comparison to Bessent's past association with Soros and Stanley Druckenmiller during the 1992 sterling episode. Kenneth Rogoff, a Harvard professor and former chief economist at the International Monetary Fund, likened the action to earlier US support for Argentina and said it amounted to "a bandage to buy the BoJ a bit more time" unless the Treasury were prepared to hold far larger yen reserves. Masahiko Loo, senior fixed-income strategist at State Street in Tokyo, said the intervention was buying time, with the substantive response resting with the Bank of Japan and Japanese fiscal policy.
The operation carries direct implications for Treasury market positioning. Rushabh Amin, a multi-asset portfolio manager at Allspring Global Investments, said the administration favours a weaker dollar while seeking to avoid investors selling Treasuries to defend their own currencies. Brij Khurana of Wellington linked elevated Japanese government bond yields to US Treasury yields, noting that supporting the yen could ease yields in both markets. Mark Dowding, fixed-income chief investment officer at RBC BlueBay Asset Management, said yen weakness risked undermining Japanese government bonds and contributing to higher long-dated yields internationally. Daleep Singh, chief global economist at PGIM, warned that a failed intervention could produce significant spillover effects for long-term Treasuries.
Japan remains the largest official holder of US Treasuries, and foreign central banks' Treasury holdings at the Federal Reserve have fallen to their lowest level since 2012, against a backdrop of US long-term borrowing costs at their highest since 2007. Should renewed pressure return to the yen or the Japanese government bond market, that exposure could extend into US Treasury demand, with Japan's planned use of the Federal Reserve repo facility offering a possible alternative route to dollar liquidity that would not require additional Treasury sales.
