U.S. Treasury Secretary Scott Bessent visits Japanese Finance Minister Satsuki Katayama // Photo: White House
The To-Do Note That Triggered a Yen Rescue
On July 31, President Trump convened his cabinet members for their 13th cabinet meeting of his second term. Notably, a Reuters photographer captured a handwritten to-do list on Treasury Secretary Scott Bessent’s desk stating, “Buy Japanese Yen (JPY) $5-10 bil”—fueling market speculation. Days later, Secretary Bessent, Japanese Minister of Finance Satsuki Katayama, and President Donald Trump confirmed the financial operation with Trump saying, “…they wanted a little bit of help, and we’re always there for Japan.” This rare intervention may not be the last action against “disorderly yen movement,” signaling the importance of Japanese economic stability and orderly yen markets to U.S. national security objectives in Asia.
For context, the last time Japan and the U.S. bilaterally intervened in foreign exchange markets occurred in 1998 during the Asian Financial Crisis. From 1997-1998, the Japanese yen had depreciated sharply against the dollar making Japanese exports cheaper relative to American goods, while making U.S. exports more expensive for Japanese consumers. At the time, this placed competitive pressure on exporters across the region as countries attempted to maintain their own trade competitiveness. The crisis of 1998 demonstrated how a weak yen can amplify regional financial instability by weakening the competitiveness of other Asian exporters and encouraging further financial speculation. The memory of the regional effects during the Asian Financial Crisis could have played a role in the swift intervention that recently took place in an attempt to prevent disorderly currency movements and disrupt broader financial contagion.
In late July, The Bank of Japan (BoJ) sold an estimated $58.97 billion USD to buy yen, signaling its repeated efforts to prop up the yen. The U.S. Treasury sold euros to purchase $5-10 billion worth of yen in coordination with BoJ. The coordinated intervention in the foreign exchange markets took place over two trading sessions and was structured to avoid unnecessary pressure on the dollar given that the euro-yen market is far less liquid than the dollar-yen market. The BoJ also used the Federal Reserve’s Foreign and International Monetary Authorities (FIMA) Repo Facility, allowing Japan to temporarily access dollars without selling those Treasury holdings on the open market, which could put upward pressure on U.S. yields.
The action taken by the U.S. government was intended to prevent disorderly depreciation and reduce the risk of broader financial spillovers. If the U.S. did not take decisive action along with the Japanese government, Japan—the largest holder of U.S. debt—could have possibly liquidated a large sum of U.S. treasuries to raise emergency cash. The resulting treasury prices in the U.S. would have fallen and yields would have risen, increasing costs globally because mortgage rates, corporate borrowing costs, and government debt-servicing costs are tied to the performance of U.S. yields. By intervening rapidly and at scale, the two governments made it more costly for short-term speculators to bet against the yen while signaling that further depreciation would face official resistance. As Treasury Secretary Scott Bessent stated when announcing the intervention on X, “economic security is national security,” and the U.S. action is a clear representation of economic statecraft in support of allies.
The intervention also is intended as a strategic signal of multi-faceted support to one of the U.S.’ strategic military anchors in the region. Prime Minister Takaichi already faces domestic political pressures; a prolonged yen decline could place additional pressure on Japan’s ability to finance its historic military buildup. Price stabilization efforts can help preserve the fiscal and political space Tokyo needs to sustain its defense spending while continuing its social programs for an aging population. If Japan sees a cross-strait invasion of Taiwan as an “existential crisis,” as Takaichi prompted in her first speech as prime minister, Japan will need sufficient economic and fiscal stability to prepare for a worst-case scenario.
The yen intervention demonstrates how financial stability has become increasingly intertwined with U.S. national security. While the Bank of Japan and U.S. Treasury have different interests, both faced a common concern: preventing a disorderly yen depreciation and the financial instability that could follow. The possibility of large-scale Treasury sales only heightened the stakes for Washington, creating the unusual conditions for this rare intervention. For Washington, maintaining Japan’s economic stability is not simply about protecting currency markets; it is about preserving the financial resilience of a critical ally, limiting spillovers into U.S. markets, and strengthening the economic foundation of the Indo-Pacific security architecture.
