WASHINGTON — U.S. Treasury Secretary Scott Bessent has warned that sharp and disorderly movements in the Japanese yen could create broader instability across global financial markets, highlighting renewed concerns over currency volatility and international borrowing costs.
Bessent made the warning in a letter dated August 27 responding to questions from Senator Elizabeth Warren about a joint U.S.-Japan currency intervention conducted in July.
Yen Weakness Draws Global Attention
The intervention was designed to prevent a further decline in the yen and a potentially destabilizing selloff in Japanese government bonds.
The yen has since weakened again and is approaching the psychologically important level of 160 yen per U.S. dollar. A move toward that level could increase pressure on Japanese authorities to consider additional intervention.
Bessent warned that disorderly currency movements could trigger the forced unwinding of financial positions. Such a chain reaction could spread across markets and potentially increase borrowing costs for consumers and companies.
The concern extends beyond Japan because the yen plays an important role in global financial markets. Investors and financial institutions use Japanese assets and currency positions in a wide range of international strategies.
The Treasury secretary said the July intervention used the U.S. Exchange Stabilization Fund, with foreign-currency assets exchanged for yen.
Currency intervention is generally intended to calm markets rather than permanently determine exchange rates. Its effectiveness can therefore depend heavily on broader economic conditions, interest-rate differences and investor expectations.
For U.S. businesses, renewed currency instability could affect international revenues, import costs and financing conditions.
The warning also comes as financial markets enter September with investors already watching inflation, Federal Reserve policy and geopolitical risks.
A sustained decline in the yen could therefore become another factor for global investors to monitor as markets assess whether central banks can keep inflation under control without creating new financial instability.
