U.S. Treasury Secretary Scott Bessent Stresses Importance of Stable Yen and Notes Korean Won Volatility

U.S. Treasury Secretary Scott Bessent stated on Tuesday that a stable Japanese yen is critical for the United States and the entire region. Speaking in a CNBC interview, Bessent followed a rare joint intervention by the United States and Japan last week intended to address the sharp decline of the yen against the U.S. dollar. He warned that if the yen were to weaken substantially, other currencies would follow, and he specifically noted that the South Korean won has experienced excess volatility.

Bessent, describing himself as an economic historian, suggested that an overly weak yen partially triggered the Asian financial crisis in the 1990s. He expressed hope that appropriate policies in Japan will return the yen to a more normal equilibrium price. He emphasized that the U.S. remains in close and constant communication with Tokyo and will do whatever it takes to support Japan in a manner that stabilizes the global economy and benefits the American taxpayer.

Regarding the carry trade, where investors borrow low interest currencies like the yen to invest in higher yielding assets, Bessent predicted the practice will not disappear entirely. He noted that Japan has accumulated substantial overseas assets since the 1970s and continues to provide liquidity to the world. However, he cautioned that the level of the yen could trigger unhealthy competitive devaluations.