macro
US Treasury Warns of Systemic Risks from Weak Yen
The US Treasury has issued a warning about the potential systemic risks posed by an unorderly weakening of the Japanese yen, highlighting possible market instability and increased borrowing costs.
AS1 News
In a recent letter, US Treasury Secretary Scott Bessent emphasized that a sharp and disorderly decline in the yen could trigger forced liquidation of yen-denominated positions, leading to market instability. The yen reached a 40-year low of approximately ¥164 per dollar in July, then strengthened to around ¥155.2, but is again approaching a critical level near ¥160. Such movements could result in widespread asset sell-offs, increased market volatility, and higher borrowing costs for US companies and households. The coordinated interventions by the US and Japan temporarily supported the yen, but the underlying risks remain significant if the currency continues to weaken rapidly.
The warning underscores potential macroeconomic instability and increased financial market volatility stemming from currency fluctuations.