Overview
- The United States and Japan stepped into FX markets during New York trading on Friday to buy yen after the currency hit multi-decade lows versus the dollar.
- Treasury Secretary Scott Bessent said on Aug. 4 that a stable yen matters for the U.S. and the region because a substantially weaker yen could prompt other Asian currencies to fall in turn.
- Bessent warned that the South Korean won has shown "excess volatility," and U.S. officials worry that currency swings could complicate Seoul's ability to carry out a US$350 billion investment pledge to the United States.
- Officials said Washington is in close, constant contact with Tokyo and is prepared to coordinate further interventions if needed, while markets watch whether the Bank of Japan will change policy to make any yen gains durable.
- Analysts point to structural drivers — large Japanese foreign-asset holdings and persistent U.S.-Japan interest-rate gaps that support carry trades — and officials cite the 1990s Asian financial crisis as a caution about how a weak yen can spread instability.