The U.S. has released a strong signal to stabilize exchange rates! Bessent: Will support Japan in curbing the decline of the yen.

U.S. Treasury Secretary Scott Bessent stated on Tuesday that the weakness of the yen has exacerbated Japan's inflation problem and increased the risk of broader depreciation of Asian currencies. He reiterated U.S. support for efforts to stabilize exchange rates. In an interview, Bessent expressed, The current level of the yen could trigger other problems or lead to competitive devaluation, which is unhealthy. A stable yen is not only important for the U.S. but vital for the entire Asian region. His remarks come on the heels of the joint U.S.-Japan intervention in the foreign exchange market last week to support the yen. Recently, the yen has fallen to its lowest level against the dollar in forty years. When asked whether the U.S. would intervene further, Bessent stated that the U.S. is maintaining close contact with Japanese authorities and that we will do everything we can to support them in a way that benefits the U.S. economy, American taxpayers, and stabilizes the global economy. After the joint intervention, the yen rebounded significantly, but on Tuesday its gains paused, trading at approximately 157.54 yen to 1 dollar. On July 23, the yen had fallen to a low near 164, the weakest level since 1986. Bessent pointed out that Japan's inflation problem partly stems from rising energy costs due to the yen's weakness. He also stated, If the yen weakens significantly, other currencies will follow suit. We have seen excessive volatility in the Korean won. Many believe the Chinese yuan is undervalued. Before becoming Treasury Secretary, Bessent had decades of experience in forex trading for hedge funds. He noted that intervention can send a market signal, but ultimately, policy is needed to turn the situation around. He mentioned that Prime Minister Sanae Takaichi's government is moving towards budget discipline, including achieving a primary surplus. When asked if stabilizing the yen would require the Bank of Japan to raise interest rates, Bessent said he would not prejudge how the central bank should act. He has known Bank of Japan Governor Kazuo Ueda for 15 years, stating, I trust he will take necessary actions. Bessent remarked, After intervention, policy follow-up is needed, and I am very confident we will see that. Regarding the notebook captured during last Friday's cabinet meeting that listed buy yen as a to-do item, Bessent suggested it was a deliberately sent signal. He said, I just wanted to make sure all the reporters observing from the sidelines know JPY stands for yen. When asked about reports that the U.S. used euros to purchase yen during last Friday's intervention, Bessent stated that the U.S. is in close contact with European partners, including central banks and some finance ministers. He assured them, This is just a reallocation of our reserve assets. He also noted, In my view, the euro is closer to its equilibrium price, while the real issue is that the yen is severely undervalued.