US Treasury Secretary Scott Bessent has defended last month's intervention to support the yen, warning that extreme volatility in the Japanese currency could transmit to American shores and push up interest rates. In a letter responding to recent questions from Democratic Senator Elizabeth Warren about the yen operation, dated August 27, Bessent noted that Japan holds a significant portion of US Treasury debt. A disorderly yen market could trigger forced unwinding of positions, disrupt global markets, and ultimately raise borrowing costs for American households and businesses. Bessent shared the letter on X on Friday.

He declined to disclose the exact amount deployed in the late-July intervention but confirmed the action involved buying yen using existing foreign currency assets from the Exchange Stabilization Fund. Earlier this month, he hinted the Treasury had utilised euros for the operation. On the same Friday, Japan reported spending a record $96.4 billion over the past month to bolster its currency.

Observers of the Treasury had already linked Bessent's uncommon move, the first US intervention to buy yen since 1998, to concerns about preventing a rise in Treasury yields. Japan stands as the largest foreign holder of American government securities. Warren, the top Democrat on the Senate Banking Committee, had requested details on the analysis behind the Treasury's use of the Exchange Stabilization Fund. Bessent stated the Treasury acted within the fund's regulations, which explicitly authorise the Secretary, with presidential approval, to engage in foreign exchange transactions that support orderly exchange rate arrangements.

Bessent emphasised that no credit was extended to Japan in this process and that Tokyo owes the US Treasury no repayment, meaning there is no risk of Japan defaulting on a debt that does not exist. The yen, meanwhile, has relinquished part of the gains from the intervention, slipping past 160 per dollar on Friday for the first time since the action took place.