US Treasury Secretary Bessent: Many Asian currencies track Yen now, including Won and Yuan
US Treasury Secretary Scott Bessent said that the weakness of the Japanese Yen (JPY) has contributed to Japan’s inflation problem and raised the risk of broader depreciation of Asian currencies, Bloomberg reported on Tuesday.
Bessent further stated that Washington is in close contact with Japan and said that “we will do whatever it takes to support them in a way that helps the American economy, the American taxpayer, and stabilizes the global economy.”
Key quotes
It’s just the level of the yen that could trigger other problems or trigger competitive devaluations, which is unhealthy.
A stable yen is not only important for the US but very important for the entire region” of Asia.
If the yen were to weaken substantially, then the other currencies would follow it. We’ve seen excess volatility in the Korean won. Many people believe that the Chinese RMB is undervalued.
Confident in BoJ Governor Ueda, who is highly market savvy.Market reaction
Market reaction
At the time of writing, USD/JPY is down 0.04% on the day at 157.65.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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