NEW YORK — The Japanese yen is once again drawing intense attention from global investors after falling back toward 160 yen to the U.S. dollar, while U.S. Treasury Secretary Scott Bessent warned that disorderly currency movements could trigger wider financial instability.
The warning follows a rare intervention by the United States and Japan in July, when authorities bought yen in an effort to slow the currency's decline.
Currency Risk Moves Back to Center Stage
The yen briefly strengthened following the intervention but has since weakened again, renewing speculation that Japanese authorities could return to the market.
Bessent warned that sharp and disorderly movements could force investors to unwind financial positions, potentially affecting markets well beyond Japan. He also said such instability could eventually increase borrowing costs for U.S. households and businesses.
The concern reflects the yen's importance in global financial markets.
Japanese interest rates have remained relatively low compared with borrowing costs in other major economies. That difference has encouraged investors to use yen-based financing for international investments.
If the yen moves sharply, investors can be forced to unwind those positions, potentially creating selling pressure in other markets.
Japan has already spent a record amount supporting its currency. Ministry data showed Japanese authorities spent about $96.5 billion during the previous month on foreign-exchange intervention.
The latest developments mean investors are watching both Japanese policy and U.S. interest-rate expectations.
Federal Reserve Chair Kevin Warsh has indicated that the central bank could consider additional tightening if inflation remains too high, adding another source of pressure to global currency markets.
For businesses, currency volatility can affect import costs, international revenues and investment decisions.
The yen's next major move could therefore become an important signal for global markets as September approaches.
