U.S. Treasury Secretary Scott Bessent said in an interview that the most recent decline in the Japanese yen seems to be under control and does not display the disorderly characteristics that led to an uncommon coordinated intervention by Japan and the United States the previous month.
Speaking to Reuters, Bessent was careful to avoid directing monetary policy in Tokyo. When asked whether the Bank of Japan should adopt a more aggressive path of rate increases, he responded, "I’m not going to tell them what to do." He nonetheless expressed an expectation that BOJ Governor Kazuo Ueda will make appropriate choices with support from Prime Minister Sanae Takaichi.
In his remarks, Bessent also signaled a view about the broader policy stance in Japan, saying, "I do think that we probably reached the end of Abenomics, which was a reflationary program." He framed that observation separately from urging any specific action by Japanese authorities.
The yen slid below 160 per dollar on Friday, crossing a level that many market participants watch closely for potential intervention. That move has prompted renewed discussion about whether Japan and the United States might again step in to support the currency, though Bessent described current moves as relatively contained.
By declining to advise the Bank of Japan on its interest rate decisions, Bessent maintained a stance of noninterference while indicating confidence that Japanese leaders will respond as they deem appropriate. His comments reiterate U.S. awareness of currency developments but stop short of recommending policy prescriptions.
The situation underscores an ongoing sensitivity in currency markets to thresholds that can trigger official responses. While the yen’s dip beneath 160 per dollar has raised questions about further action, Bessent indicated that the recent fluctuations do not mirror the disorder that precipitated last month’s coordinated intervention.
Key points
- Scott Bessent described recent yen movements as "pretty well contained," suggesting the decline does not amount to disorderly trading.
- Bessent declined to instruct the Bank of Japan on its interest rate strategy but said he expects Governor Kazuo Ueda to "do the right thing" with support from Prime Minister Sanae Takaichi.
- The yen breached the 160-per-dollar level, a threshold that elevates the prospect of intervention and draws attention from currency markets and policymakers.
Risks and uncertainties
- Further declines in the yen could prompt renewed official intervention, affecting currency and forex markets.
- Uncertainty over BOJ policy direction could influence financial market volatility, including impacts on bonds and equities sensitive to currency moves.