WASHINGTON - The United States sees the substantial undervaluation of the Japanese yen as a serious risk to economic stability in Asia, Treasury Secretary Scott Bessent said Tuesday, citing it as a major reason why Washington joined Tokyo in a recent currency intervention.
During a CNBC interview, Bessent said he believes the Asian financial crisis of the late 1990s was in part a result of an "overly weak yen." He said, "So I think a stable yen is not only important for the U.S., but very important for the entire region, because if the yen were to weaken substantially, then the other currencies would follow it."
Drawing attention to volatility in South Korea's won and persistent views that China's yuan is undervalued, he said it is crucial to prevent the yen from destabilizing, "given the trade flows, given the size of the (Japanese) economy, given their contribution to the global savings market."
"The Japanese government understands that, and we are proud to stand with them in implementing their policies and help them stabilize the region," he added.
Bessent's remarks came two days after he confirmed that the United States and Japan stepped into the currency market during New York trading on Friday to support the yen, after it touched a 40-year low against the U.S. dollar in late July.
The last U.S.-Japan yen-buying intervention happened at the height of the financial crisis in 1998.
Bessent said he has an "extremely good working relationship" with Japanese Finance Minister Satsuki Katayama, and that he believes Tokyo will continue to take appropriate measures to bring the yen back to "more of a normal equilibrium price."
When confirming Friday's intervention in their separate remarks, Bessent and Katayama both said the financial authorities of their respective countries would not hesitate to participate in further coordinated action.
The joint intervention was the first since a yen-selling action in 2011, carried out after a catastrophic earthquake and tsunami hit northeastern Japan, triggering the worst accident at a nuclear plant since the Chernobyl disaster in 1986.
At the time, the United States and Japan, together with other members of the Group of Seven, intervened to sell the yen to curb its rise.
On Sunday, U.S. President Donald Trump told reporters that Japan had sought a "little bit of help" to prop up the yen and called the latest coordinated action a "signal of friendship."
Trump also said the action would financially benefit the United States and be good for the global economy.
In his TV interview, Bessent praised Japan's long-running efforts to tackle sluggish economic growth through its policy mix of aggressive monetary easing, fiscal stimulus and structural reforms, referring to the late Prime Minister Shinzo Abe's "Abenomics."
"Japan has come out of deflation, and they're back," he said. "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 U.S. decided to join because we are very optimistic on their policy path."
Asked whether the Bank of Japan's next move should be a rate hike, Bessent said he did not want to weigh in on what the central bank, led by Governor Kazuo Ueda, needed to do.
"I've known Governor Ueda for more than 15 years, and I believe that he will do what is needed," he said.
Bessent said in an X post last week that he was looking forward to seeing Ueda at the end of August in North Carolina during a meeting of Group of 20 finance ministers and central bank governors.
The yen's depreciation against the dollar in recent years is partly attributable to U.S.-Japan interest rate differentials.
But since Japanese Prime Minister Sanae Takaichi took office in October last year, the yen has faced increased pressure, with market players fretting over the country's fiscal deterioration as she has backed Abe's vision for the economy while pursuing expansionary fiscal policies.
"We will do whatever it takes to support (Japan) in a way that helps the American economy, the American taxpayer, and stabilizes the global economy," Bessent said in Tuesday's interview.
