A photographer at Camp David caught Treasury Secretary Scott Bessent’s notepad. It read “Buy Japanese Yen (JPY) $5-10 bil.”
On Tuesday he explained the plan. Bessent told CNBC the US bought yen because the currency had fallen too far. The market is already pushing back.
Why the US Bought Yen for the First Time Since 1998
The yen had sunk to its weakest level since 1986. So Japan and the US stepped in and bought it, which pushes the price up.
Japan’s Finance Ministry confirmed the move on Monday. Minister Satsuki Katayama said Tokyo bought yen “in coordination with the U.S. Department of the Treasury” on Friday. She added that Japan “will not hesitate to conduct further joint intervention.”
The plan was not new. Both governments signed a statement last September agreeing to act together if the yen moved in a disorderly way. The notepad leaked the timing, not the policy.
What is new is the size. The last time Washington bought yen was June 17, 1998. Back then it spent just $833 million, according to the New York Fed. Bessent’s note points to six to 12 times more.
Nobody knows yet what Japan spent. Estimates near $59 billion are guesses based on central bank cash flows. Tokyo publishes the real number on August 31.
Bessent was relaxed about the leak itself.
“I just wanted to make sure that all the reporters looking over my shoulder also knew the symbol. JP for the Japanese yen,” he said in the interview.
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He was firmer on the reason. This was not a one-day rescue, he said, but part of a longer plan with Tokyo.
“This is more than just a market intervention… through our conversations with them, we believe that they are going to continue to put the right policies in place that will lead the yen to get back to more of a normal equilibrium price,” Bessent told CNBC.
Bessent also has a history lesson. He blames part of the 1997 Asian Financial Crisis on a yen that fell too far.
Back then, weakness in Japan dragged neighboring currencies down. South Korea’s won, he said, is already jumpy today.
“…part of it was triggered by an overly weak yen. So I think a stable yen is not only important for the U.S. but it’s very important for the entire region, because if the yen were to weaken substantially, then the other currencies would follow it.”
Bessent Says Policy Matters More Than the Yen Intervention
Here is his key point. Buying a currency sends a message. Fixing a currency takes interest rates and budgets.
“I think here we can give market signals. But at the end of the day, it’s going to be policy and fundamentals. And the US decided to join because we are very optimistic on their policy path.”
The 1998 record backs him up, and then goes further. That day the dollar dropped from 142.21 yen to 136.51. Two weeks later it was back at 138.88. Roughly 40% of the gain was gone.
The yen finally turned four months later. No government bought a single yen. The dollar fell from 133.90 to 120.55 on October 7, 1998, then to 111.58 the next morning. Hedge funds were dumping dollars to cut their losses.
The dollar lost 17.4% against the yen that quarter. The New York Fed confirmed nobody intervened at all.
So the fix Bessent wants depends on Japan raising rates. The Bank of Japan (BOJ) held at 1% on July 31. One of nine members voted for a hike.
The US is moving the other way. The Federal Reserve held rates at 3.50% to 3.75% on July 29, and three officials wanted them higher. That leaves a gap of about 2.6 points.
That gap is the whole problem. Traders borrow cheap yen and park the cash in dollars that pay more. While the gap stays wide, betting against the yen still pays.
Why Bitcoin Cares About the Yen
The market has already started answering the question. The dollar fell to just under 155.5 yen during the operation. By Tuesday afternoon in Asia it was back at 157.54.
That is more than two yen recovered in two sessions. It is close to a quarter of everything the intervention won.
Look at the chart and one level jumps out. Japan defended the yen in late April and stalled just under 155.5. It happened again on Friday. Bank of America now calls 155 the line where traders expect Tokyo to fight.
TD Securities is blunter. It sees a possible dip to 153, but still expects 159 by year end. A lasting move needs the BOJ to hike and the US Treasury to stay committed.
Katayama hinted at deeper plumbing. Japan plans to use a Fed facility that lets it borrow dollars against the US government bonds it already owns. That way it can raise cash without selling those bonds.
Now the crypto link. Bitcoin (BTC) trades near $63,808, up about 2% on the day. Its total value sits close to $1.28 trillion.
Cheap yen has funded bets on risky assets for years, crypto included. A stronger yen makes those bets expensive to hold. Analysts are split on whether this yen carry trade pattern drags Bitcoin toward $50,000.
That is the awkward part of Bessent’s history lesson. In 1998 the intervention faded in two weeks. The yen only really turned when traders were forced to unwind those cheap yen bets. For crypto, that second outcome is the scary one.
Bitrue