What Is Bessent Really Playing At? The 4 Unusual Moves by the US to Rescue the Yen, Whose Real Target Isn’t Exchange Rates

The US Treasury last week joined forces with Japan to buy yen, helping to support the currency as it fell to a nearly 40-year low. This marks the first time the US has intervened in foreign exchange markets since 2011. Yet the entire intervention process broke decades of precedent at nearly every step: advance notification to markets, the use of euros to buy yen, and the 'accidental' exposure of Treasury Secretary Bessent’s notes. These unusual moves have raised numerous questions: What is the US really aiming for?

Doubt 1: If the goal was intervention, why notify the market in advance?

The greatest weapon in foreign exchange intervention has always been 'surprise.' Central banks or finance ministries typically enter the market without warning, using sudden large-scale transactions to maximize shock value and shift market expectations.

Yet this time, the US Treasury did the opposite—pre-notifying foreign exchange traders at several banks that it might intervene at a specific time.

For the market, this was equivalent to revealing their hand in advance, significantly weakening the psychological impact that official intervention relies on. This left many forex traders puzzled.

Doubt 2: If the goal was to weaken the dollar, why use euros to prop up the yen?

Initially, it was speculated that the US decision to team up with Japan to boost the yen might be the latest move in a long-term White House strategy to weaken the dollar, thereby reducing the US trade deficit and enhancing American competitiveness.

But then the question arises: if the US wanted to weaken the dollar and support the yen, the most direct method would be to sell dollars and buy yen. Yet this time, the US did not do so. Instead, it used euros as the funding source, buying yen via a third currency.

This kind of operation is rare in past major forex interventions, leading markets to speculate that what the US truly wanted to avoid might not be dollar appreciation, but another market risk.

Reuters columnist Jamie McGeever analyzed that US 10-year Treasury yields have already risen to their highest level since 2007, and mortgage rates have climbed in tandem. If US authorities directly sold dollar assets to buy yen, markets might interpret this as the government beginning to divest dollar holdings, potentially pushing Treasury yields even higher.

In other words, using euros may not have been a technical issue, but a deliberate effort to avoid sending the wrong signal to markets.

Doubt 3: As a legendary trader, did Bessent really need a note to remind himself?

There was another unexpected twist in this intervention. On the day President Trump hosted a cabinet meeting at Camp David, a Reuters photographer captured Bessent’s notebook, on which a 'To Do' note read: 'Buy Japanese Yen (JPY) 5-10 bil. (Buy 50–100 billion yen).' After the photo went public, it immediately became a market talking point.

Bessent is no ordinary Treasury official. A former hedge fund manager with decades of experience in foreign exchange markets, he once helped 'financial crocodile' George Soros successfully short the British pound and is considered one of the world’s most renowned currency traders.

Therefore, many market participants questioned whether someone so deeply familiar with forex operations truly needed to write down 'remember to buy yen,' even specifying the currency code 'JPY.' More than a simple work memo, this note appeared to be a deliberate policy signal, highlighting Bessent’s markedly different style compared to previous Treasury secretaries.

Doubt 4: Is this 'Xiang Zhuang dances with his sword, but aims at Liu Bang'?

Steven Englander, Standard Chartered’s G10 FX strategy head, bluntly stated that the timing of the US intervention was baffling.

The Bank of Japan had just decided to keep interest rates unchanged. While the yen was indeed weak, it was not the most pressing economic issue for the US. He added, 'If they really wanted to intervene, there was no need to orchestrate such a dramatic process.'

Reuters pointed out that Japan remains the world’s largest holder of US Treasuries. If the yen continues to plunge, Japanese authorities may be forced to sell more US bonds to fund currency support, further pushing up Treasury yields and potentially shaking global financial markets.

Thus, the US’s use of the Fed’s FIMA mechanism—and avoiding direct dollar sales to buy yen—could help reduce the pressure on Japan to sell Treasuries.

Notably, Japan’s US Treasury holdings in May dropped by about $67 billion to approximately $1.14 trillion—its largest monthly decline since September 2022 and the third-largest on record—indicating Japan has indeed begun adjusting its overseas asset positions.

From pre-notifying markets and using euros to buy yen, to the 'accidental' leak of the 'buy yen' note, this first joint US-Japan intervention in 15 years may appear to be rescuing a plunging yen. But in reality, it looks more like a carefully designed policy signal.

For Washington, the biggest risk may no longer be whether the yen continues to depreciate, but the chain reaction between a weak yen, rising US Treasury yields, and global capital flows. If Japan is forced to sell large volumes of US Treasuries to defend its currency, the impact could rapidly spread from forex markets to the entire global financial system.

Thus, this seemingly abnormal forex intervention may be 'Xiang Zhuang dances with his sword, but aims at Liu Bang'—the real target being US Treasuries, the most critical asset in the global financial system.