Treasury Secretary Scott Bessent defended his move last month to support the yen, saying that any extreme volatility in the Japanese currency could feed through to higher U.S. interest rates. Treasuries,” Bessent said in a letter Thursday responding to Democratic Sen. Elizabeth Warren’s recent inquiry about the yen operation.
Also on Friday, Japan reported that it had spent a record $96.4 billion in the past month to support the yen. Treasury watchers had connected Bessent’s unusual move — the first U.S. intervention to buy the yen since 1998 — with concerns about heading off any rise in Treasury yields. Japan is the largest foreign holder of U.S. government securities.
Warren, the top Democrat on the Senate Banking Committee, had pressed Bessent to provide the analysis behind using the Treasury’s ESF. Bessent said his department had followed the ESF’s statute, which “expressly authorizes the secretary, with presidential approval, to deal in foreign exchanges in support of orderly exchange agreements.” “No credit was extended to Japan,” Bessent said. There is therefore no risk that Japan will fail to repay a debt that does not exist.” The yen has surrendered some of the gains from the intervention, and on Friday fell below ¥160 per dollar for the first time since that day.
In keeping with the sometimes-tense exchanges Bessent has had with Warren in congressional hearings, the Treasury secretary’s letter included a number of barbs at the senator. At one point he recommended “any entry-level course in international finance” and offered to give a “tutorial on Foreign Exchange for Dummies.” Saloni Sharma, a spokesperson for Senate Banking panel Democrats, said in response to the letter that, instead of “lashing out,” Bessent “should focus on reducing the cost of living for the American families struggling to afford everyday life under President Trump’s failed economic agenda.”
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