Key Highlights

  • Treasury Secretary Scott Bessent said the U.S. will do whatever it takes to support Japan's effort to stabilize the yen, following last week's joint currency intervention.
  • The yen had dipped to 158 per dollar before recovering slightly to 157.55 after Bessent's comments, still well off recent 40-year lows near 164.
  • Bessent said he supports the Federal Reserve considering an upsized Foreign and International Monetary Authorities Repo Facility, which could allow the Bank of Japan to borrow up to 60 billion dollars.
  • Former Treasury Secretaries Timothy Geithner and Henry Paulson separately said intervention effectiveness depends on Japan following through with supportive policy, including an anticipated interest rate hike.

A Firm Public Commitment Following Last Week's Joint Action

Treasury Secretary Scott Bessent said the United States will do whatever it takes to support Japan's effort to stabilize the yen in a manner that also benefits the American economy and taxpayer, speaking two days after confirming the Treasury had joined Japanese authorities in a currency intervention the prior Friday. Bessent said the yen's substantial undervaluation risked triggering broader economic problems or competitive currency devaluations elsewhere, characterizing that outcome as unhealthy for the global financial system.

The yen had weakened to 158 per dollar from Monday's immediate post-intervention level of about 156 before Bessent's remarks, then recovered modestly to 157.55 afterward, though it remains well off the roughly 164 level marking its recent 40-year low. Bessent did not discuss the specific mechanics of U.S. participation in Friday's joint intervention during the interview.

Support for Expanding a Federal Reserve Backstop Facility

Bessent expressed support for Japan's interest in utilizing the Federal Reserve's Foreign and International Monetary Authorities Repo Facility, a pandemic-era backstop that would allow the Bank of Japan to borrow up to 60 billion dollars to support the yen. He suggested the facility, established in 2020 when bond markets were considerably smaller, could reasonably be upsized by the Federal Reserve, framing its core purpose as protecting the U.S. economy by keeping financial volatility contained offshore.

Regarding reports that the U.S. sold euros to help fund yen purchases, Bessent said he had reassured European counterparts, including central banks, that the move represented simply a reallocation of resources rather than a signal about the euro's valuation. He characterized the euro as trading much closer to equilibrium, framing the intervention's primary rationale as addressing the yen's undervaluation alongside policies being pursued by Japan's current government.

Former Treasury Officials Offer Contrasting Perspectives on Effectiveness

Former Treasury Secretary Timothy Geithner, who oversaw U.S. participation in a coordinated G7 yen sale following Japan's 2011 earthquake, said intervention can be effective but generally only functions as a bridge to supportive policy or when aligned with an underlying policy direction over time. Geithner said financial markets are anticipating that Japan will need to follow through with an interest rate increase to reinforce the intervention's objectives, adding that coordination among major economic powers could improve the odds of the intervention proving effective.

Former Treasury Secretary Henry Paulson, who served during the 2008 financial crisis response, said it remains difficult for Japan to defy underlying economic pressures given its high debt levels and the tension between anticipated higher interest rates and the current government's more expansionary policy approach. Paulson nonetheless said continued U.S. support for Japan serves mutual interests, noting specifically that neither country benefits from Japan being forced into selling U.S. Treasury holdings under financial pressure.

Conclusion

Bessent's public commitment to sustained U.S. support signals continued coordination between Washington and Tokyo following last week's joint intervention, even as former officials caution that lasting currency stabilization will likely require Japan to follow through with complementary monetary policy action. The contrast between Bessent's forward-looking pledge and the more measured assessments from Geithner and Paulson highlights genuine uncertainty about whether intervention alone can durably address the yen's underlying weakness. Whether the Bank of Japan proceeds with an anticipated rate increase is likely to be a key factor determining how effective this coordinated approach ultimately proves.