Bank of Japan8301
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Bessent’s Yen Pledge Faces Doubts Over Limited US Intervention Firepower
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Treasury Secretary Scott Bessent’s suggestion of a no-limits approach toward helping Japan rescue the yen is being questioned by market participants who point to his limited firepower. The yen slid as much as 1% Monday, erasing half the gains from the first US-Japan joint intervention since 1998, and dropped past 159 per dollar. Bessent’s main dedicated instrument, the Exchange Stabilization Fund, holds less than $220 billion, while Japan alone spent an estimated $53 billion on yen operations on July 30. The Federal Reserve, which has theoretically unlimited capacity, limited its role to conducting yen purchases on behalf of the Treasury and did not contribute its own funds, unlike in past interventions. Pressure could rise if the yen sinks past 160 per dollar, a key psychological threshold, and Bessent’s motivation is seen as halting contagion into Treasuries, though some experts call intervention a Band-Aid over US fiscal issues.
