Why Trump’s Yen Intervention Echoes the 1960s Financial Crisis
- According to reporting by Project Syndicate, Bessent was photographed in late July holding a to-do list dedicated to purchasing $5 billion to $10 billion worth of yen, signaling...
- Bessent's public rationale relies on the premise that the yen is undervalued and that Washington opposes competitive devaluations aimed at boosting exports.
- Neither Tokyo nor Washington appears ready to undertake those structural shifts.
According to reporting by Project Syndicate, Bessent was photographed in late July holding a to-do list dedicated to purchasing $5 billion to $10 billion worth of yen, signaling that the Trump administration intends to do whatever it takes to stabilize the Japanese currency as US bond yields spike.
Historical Parallels and the Limits of Intervention
Bessent’s public rationale relies on the premise that the yen is undervalued and that Washington opposes competitive devaluations aimed at boosting exports. While such currency conflicts evoke memories of the protectionist wars of the 1930s that prompted the 1944 Bretton Woods Conference, Project Syndicate notes that the current puzzle actually mirrors the 1960s. During that decade, US officials grew deeply anxious that financial crises originating overseas could spread directly to the American economy. Despite these policy goals, economic history suggests single interventions rarely alter long-term trajectories. According to market analysis in Project Syndicate, academic consensus following the dollar surges of the 1980s established that interventions only move markets temporarily before economic fundamentals reassert themselves. Lasting solutions typically require adjustments to underlying policy regimes, such as higher interest rates or fiscal contractions in Japan paired with lower rates and reduced debt issuance in the United States.
Policy Clashes and Market Skepticism
Neither Tokyo nor Washington appears ready to undertake those structural shifts. Japanese Prime Minister Sanae Takaichi maintains that current interest rates are already high enough, while lowering US rates risks fueling stock market exuberance and inflation, as reported by Project Syndicate. Consequently, the yen has resumed its downward slide following its initial post-intervention bump, forcing markets to treat further government actions with increasing skepticism. Direct US participation in yen-buying operations remains rare. Project Syndicate points out that Washington has not sold yen since the Fukushima disaster in 2011 and has not bought yen since the peak of the 1997–98 Asian financial crisis. Although Bessent has also pointed to other undervalued currencies like the South Korean won and the Chinese renminbi, analysts suggest the administration’s primary motive centers strictly on protecting domestic US economic interests.
