US Treasury's Bessent warns weak yen could spark broader Asian currency slide

US Treasury Secretary Scott Bessent warned that Japan's weakening yen is already stoking inflation at home and could set off a wider bout of depreciation across Asian currencies. The yen has dropped to its lowest level since 1986, prompting Washington and Tokyo to coordinate direct action in foreign-exchange markets. On Aug. 13, 2026, the two countries bought yen in an effort to support the currency's value. A Reuters photographer later captured a cabinet-meeting notepad summarizing the plan: "Buy Japanese Yen (JPY) $510 bil." Bessent publicly described the yen as "substantially undervalued" on Aug. 1, endorsing Japan's push to stabilize the battered currency. A former hedge fund manager confirmed as Treasury Secretary in January 2025 under President Trump, he is seen as deeply familiar with the yen trade and has reportedly profited from yen-related positions earlier in his career. A weak yen raises import costs for Japanese households and companies, adding to inflation pressures the Bank of Japan has struggled to rein in. Why markets beyond FX are watching A sliding yen can push other Asian economies toward competitive depreciation. Bessent's warning about "broader Asian currency depreciation" points to the risk of a devaluation cycle taking hold. The yen carry trade—borrowing low-yielding yen to buy higher-yielding assets elsewhere—has long been a major source of global liquidity. When intervention causes the yen to strengthen abruptly, those trades can unwind quickly. The last major unwind in August 2024 rattled both equities and crypto. A $510 billion operation raises the risk of another disorderly reversal. Contagion risk in the region Bessent argued the knock-on effects are more than hypothetical. A sharp decline in one major Asian currency forces trade rivals to choose between letting their own currencies weaken to protect competitiveness or holding the line and absorbing pressure on exports. With leveraged positions tied to yen stability running into the trillions, Bessent's public flagging of regional depreciation risk is being read less as commentary and more as a warning signal.