Core Warning on Yen Volatility
US Treasury Secretary Scott Bessent warned that disorderly volatility in the Japanese yen could trigger forced position unwinds, destabilise global financial markets and push up borrowing costs for American households and businesses. He framed the risk as a potential spill‑over that could affect a broad range of asset classes worldwide.
Letter to Senator Elizabeth Warren
The warning was conveyed in an official correspondence dated 27 August 2026, addressed to Democratic Senator Elizabeth Warren. The letter was posted on Bessent’s X account on 28 August, following Warren’s request for a detailed explanation of Washington’s recent joint currency intervention with Tokyo.
Joint US‑Japan Yen‑Buying Operation
Bessent explained that the United States and Japan executed a rare joint yen‑buying operation on 31 July 2026 to halt a sharp sell‑off in both the yen and Japanese government bonds. The intervention initially lifted the yen from a 40‑year low near 164 per dollar to 155.20 per dollar, but the currency later surrendered those gains and drifted back toward the 160 per dollar level.
Role of the Exchange Stabilization Fund (ESF)
The Treasury intervened by exchanging foreign‑currency assets held within its Exchange Stabilization Fund (ESF) for yen. Bessent highlighted that the ESF is an emergency reserve managed directly by the Treasury to maintain stability across foreign‑exchange and domestic financial markets. He cited the fund’s prior use in Argentina, where it was deployed last year to support the peso market and to establish a $20 billion currency‑swap facility that helped prevent a broader regional crisis.
Recent Market Movements and Fed Commentary
On Friday, 28 August 2026, the yen briefly dipped below 160 per dollar, a level widely monitored as a trigger for potential central‑bank intervention. The dip followed remarks by Federal Reserve Chair Kevin Warsh, which reignited expectations of near‑term US interest‑rate hikes. Market data at the time showed the US dollar gaining 0.45 % against the yen, the yen falling 0.44 % against the dollar, and Japanese government bond yields slipping 0.15 %.