U.S. Treasury Secretary Scott Bessent said the yen’s latest decline is not disorderly enough to warrant concern, signaling that Washington is not currently pressing Japan for another currency intervention even after the yen fell below the closely watched 160-per-dollar threshold.
The yen slipped through 160 to the dollar on Friday, a level that has repeatedly drawn investor attention because of its association with Japanese intervention risk. But Bessent, speaking to Reuters on Sunday, said the recent moves appeared orderly.
“Oh, no. I think it’s pretty well contained,” Bessent said when asked whether the yen was experiencing disorderly movements.
Register for the next Tekedia Mini-MBA.
Register for Tekedia AI in Business Masterclass.
Join Tekedia Capital Syndicate and co-invest in great global startups.
His comments mark a notable change in tone from last month, when the United States and Japan jointly intervened in currency markets for the first time in decades to counter what Bessent described at the time as “disorderly” moves in the yen and Japanese government bonds.
The intervention on July 31 showed that Washington is willing to coordinate with Tokyo when movements in the currency and bond markets threaten to become destabilizing. Bessent’s latest remarks suggest, however, that the current level of yen weakness has not yet crossed that threshold.
The yen’s renewed weakness is being driven in part by the wide interest-rate gap between Japan and the United States. While the Federal Reserve has kept U.S. borrowing costs relatively high, the Bank of Japan has moved cautiously in withdrawing years of ultra-loose monetary policy.
That contrast makes dollar assets more attractive and can encourage investors to borrow in yen to invest in higher-yielding assets elsewhere, putting further downward pressure on the Japanese currency.
Bessent said he expected BOJ Governor Kazuo Ueda to “do the right thing” on monetary policy, with the support of Prime Minister Sanae Takaichi, while declining to tell the central bank how aggressively it should raise rates.
“I’m not going to tell them what to do,” Bessent said. “I’m going to say that I do think that we probably reached the end of Abenomics, which was a reflationary program.”
Bessent is due to meet Ueda on the sidelines of the Group of 20 finance leaders’ meeting in Asheville, North Carolina, which begins Monday.
“I’ve known him for 15 years. He’s a great economist. I think he’s underrated in how savvy he is on markets,” Bessent said.
BOJ Faces Pressure to Move Faster
The comments come ahead of the BOJ’s Sept. 17-18 policy meeting, where markets are expecting another rate increase.
Sources have told Reuters that the central bank could raise rates as soon as September and may consider a faster pace of increases thereafter. Markets are already close to fully pricing a September move, which would follow the increase delivered in June.
A September hike would be significant because it could prompt investors to reassess the assumption that the BOJ will increase rates only about twice a year. Some analysts believe that consecutive or quarterly increases would provide stronger support for the yen by narrowing the interest-rate gap with the United States.
Ueda has previously said the BOJ would pay close attention to rising inflation risks and would not rule out accelerating rate increases if financial conditions became excessively loose.
Yet even increasingly hawkish communication from the BOJ has failed to establish a lasting floor for the yen, underscoring the scale of the monetary-policy challenge facing Tokyo.
A weaker yen is problematic because Japan relies heavily on imported energy and other commodities. Currency depreciation raises the yen cost of imports and can feed into consumer prices, making inflation harder to control. At the same time, moving too quickly with rate increases could disrupt borrowing conditions and undermine economic activity after years of extremely accommodative monetary policy.
From Abenomics to ‘Takaichi-nomics’
Bessent also offered a broad endorsement of Japan’s shift away from the policies associated with former Prime Minister Shinzo Abe.
Abenomics, launched in 2013, combined aggressive monetary easing, fiscal stimulus and structural reforms in an effort to defeat persistent deflation and revive economic growth.
Bessent said Japan had already “conquered” deflation and was now moving toward what he described as “Takaichi-nomics” under Takaichi.
He characterized the new approach as more shareholder-friendly and supportive of deregulation, particularly in the labor market.
“I think they should just sit back and enjoy the success of Abenomics and let that run,” Bessent said when discussing Japan’s fiscal policy.
Takaichi, a supporter of Abenomics, has proposed substantial government spending to encourage investment in strategic growth sectors and cushion households from higher living costs. But that creates a potential policy conflict with the BOJ. Fiscal expansion can stimulate demand and raise inflationary pressure just as the central bank is attempting to tighten monetary conditions.
The bond market is already signaling investor unease. Japan’s benchmark 10-year government bond yield climbed to 2.945% earlier this month, its highest level in three decades, as investors demanded greater compensation for holding Japanese debt amid concerns over the country’s heavy government debt burden.
The rise in Japanese bond yields also matters beyond Japan. Higher domestic yields could encourage Japanese investors to repatriate money from overseas markets, potentially reducing demand for U.S. Treasuries and other foreign assets. That makes Japan’s monetary and fiscal decisions relevant to global bond and currency markets.
Intervention Risk Remains in The Background
Bessent’s assessment that the yen is “pretty well contained” may temporarily reduce speculation about another coordinated intervention, but it does not remove the risk.
A sustained move beyond 160 yen per dollar, particularly if accompanied by rapid and volatile trading, could renew pressure on Tokyo to act. Japanese authorities have repeatedly focused on the speed and disorderliness of currency movements rather than defending a specific exchange-rate level.
For now, Washington appears to be giving Tokyo room to address the yen through monetary policy rather than direct intervention. That puts greater pressure on Ueda to balance three objectives: contain inflation, prevent excessive yen weakness, and avoid tightening so quickly that the economy is destabilized.