Scott Bessent declared that he possesses asymmetric information regarding Japanese policy, challenging currency traders to bet against the yen. This statement was made during a speech at Southern Methodist University.
The US Treasury has implemented a strategy to stabilize the currency. In late July, the US conducted its first yen-buying intervention since 1998, coordinating with Japan. Before this operation, the USD/JPY exchange rate had reached nearly 164.
Japan supported this effort by spending a record $96.4 billion to support its own currency. Following the intervention, the USD/JPY rate dropped to approximately 153, representing a strengthening of the yen by roughly seven percent.
Simultaneously, the US Treasury announced plans to expand the repurchase of longer-dated US bonds, with the scale of these operations ranging from $5 to $6 billion.
These developments are particularly significant for the yen carry trade, where investors borrow in yen at low interest rates to invest in higher-yielding currencies. The seven-percent appreciation of the yen has already impacted leveraged carry traders.