In response to Washington ' s participation in the Japanese yen intervention, United States Treasury Secretary Becent stated that the Treasury had used only foreign currency assets held by the Foreign Exchange Stabilization Fund for the Japanese yen and had not provided a loan to Japan, so that there was no problem of payment by Japan and United States taxpayers bearing the loss.
Responding to Warren's question.
The dispute originated in a letter dated 13 August from United States Senator Elizabeth Warren to the Department of the Treasury challenging the use of foreign exchange stabilization funds by the Department of the Treasury during last month's U.S. dollar-coordinated market operation. In her view, if the operation in question constituted, in substance, a daily financing, the United States taxpayer might face losses.
Besente denied that. He states that the transaction did not draw on the new congressional funds and that Japan did not owe any money to the United States Treasury Department, which did not provide credit. According to data disclosed by the United States Department of the Treasury, the Foreign Exchange Stabilization Fund would have held reserve assets such as yen and euros.
The scale of Japanese intervention is close to $97 billion.
The U.S. operation is part of a larger Japanese drive. Before that, the Japanese yen had fallen to the dollar, 163, almost decades low, and Japan had stepped up its entry.
The Ministry of Finance of Japan disclosed on 28 August that during the period from 30 July to 26 August, Japan ' s foreign exchange interventions totalled 15.3993 trillion yen. Based on recent exchange rates, the size is approximately $97 billion.
Prior to that, the market had noted an intervention operation of approximately 845 trillion yen, or $52.8 billion. This U.S.-Japan operation is also considered the first coordinated intervention of the two countries since 1998.
Why does the United States care about Yen fluctuations?
The core reason for Becent is that the volatility of the yen is not just a national problem in Japan. Japan is one of the major overseas holders of United States Treasury debt and, if the exchange rate is in disarray, may force some investors to adjust their positions, thereby pushing up the cost of US financing.
This risk is also channelled to the global market through Japanese yen arbitrage. For a long time, investors have been financing in Japanese yen at low interest rates, allocating assets such as stocks and bonds. Once the yen has rebounded quickly, the positions concerned may be forced to concentrate and widen market volatility.
In short-term terms, the impact of the intervention has diminished. On 28 August, the United States dollar to the Japanese yen was collected in the vicinity of 160.07, which has recovered at a lower point since the intervention.
However, market concerns have not disappeared. While the remittance-market intervention can temporarily contain disorderly fluctuations, the continued growth of the yen will depend on changes in spreads, inflation expectations and subsequent JCB policy.