US Intervenes in Japanese Yen, Affects Global Economy

By Laura Tingle.

Topic: Currency.

On Saturday, August 8, 2026, at 5:00 am.

US Secretary of the Treasury Scott Bessent has a to-do list that includes buying Japanese yen.

At a meeting at Camp David, Bessent showed his to-do list to journalists, which included buying Japanese yen.

The list said, 'To Do, Buy Japanese Yen (JPY) $5 — $10 bill.'

Bessent knows the power of signaling in currency markets from his experience as a Wall Street banker.

The US and Japan intervened to support the yen after it fell to a 40-year low.

Bessent said the move was to help Japan, but the US also benefits from a stronger yen.

A weak yen makes Japan more competitive against the US and poses risks to the US Treasury bond market.

Japan is the largest holder of US Treasury bonds, and if they sell them to support the yen, it could increase US interest rates.

The US sold euros to buy yen, which is one reason for the intervention.

There are warnings from the 1997 crisis.

A crash in the yen's value contributed to the Asian financial crisis in 1997.

A competitive devaluation wave in South East Asia could be ugly now.

The 1997 crisis was due to structural weaknesses and volatile capital flows.

There are new flaws in some Asian economies now.

South Korea is struggling with share market volatility and over-leveraged investors.

The market has dropped 40% in 27 days, leaving many investors facing financial problems.

The volatility has made South Korea a risky investment.

Indonesia has problems with an overly ambitious government spending program.

Not all news from Asia is bad.

Vietnam's president will visit Australia, and the country has been growing fast.

Vietnam has grown 8% a year despite being targeted by Donald Trump's tariffs.

Malaysia and Singapore are also booming, thanks to their presence in IT hardware.

They are doing well despite being big importers of oil and gas during the Middle East conflict.

The IMF still predicts Asia will drive global growth, with India and China leading.

Asia is feeling the impact of disruptions to the global economy, including energy supply and AI investment.

It's not just an energy price shock.

The sudden increase in government spending is creating pressures worldwide.

Japan is at the center of these pressures, struggling to find its way back to growth.

Japan is not a leader in AI, and it's escalating its military spending.

This creates tensions between economic policy and monetary policy.

The Bank of Japan has raised rates five times, but it's hard to choose between raising rates and killing growth.

The BoJ's charter requires its actions to be compatible with government policy.

The BoJ has been buying yen to boost its value, which is an unusual move.

There are conflicting economic signals, and central banks should provide clear signals.

But there's a trend away from clear signals and central bank independence.

The governor of Bank Indonesia resigned, which unsettled markets.

There's disquiet about the US Federal Reserve's independence.

Kevin Warsh announced a new communications strategy that doesn't indicate where monetary policy is heading.

Central bank independence is in question.

Trump appointed Kevin Warsh as Fed chair after attacking his predecessor.

Trump wants the Fed chair to consult with him on interest rates.

The president has spoken with Warsh since he became chairman.

Warsh's new strategy has not settled financial markets.

Confidence in central bank independence is not good.

The decision to intervene in the yen was not coordinated with others.

The US sold euros to boost the yen, which blindsided the European Central Bank.

Typically, the US would have used dollars in such an operation.

Some ECB officials viewed the US decision as an unprecedented breach of conventions.

The US sales of euros were 'very striking' and 'sad', according to one person.

Global economic policy seems to be at the mercy of an exceptionally casual approach.

Laura Tingle is the ABC's Global Affairs Editor.

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