Bessent Swaps Euros for Yen to Aid Japan, Averting US Bond Sales

1 articles · Updated · The Nation · Aug 24

Secretary Bessent recently exchanged euros for yen in a stopgap meant to ease pressure on Japan and reduce the risk that Tokyo dumps US Treasuries.
Japan faces a rising oil import bill and persistent yen weakness from carry trades funded by decades of low domestic interest rates, leaving it short of support for the currency.
A Treasury selloff by Japan would add strain to long-dated US bonds, where Bessent’s earlier buybacks failed to lift prices and instead shifted funding toward higher-cost short-term debt.
The temporary swap could run only until November, after which Japan may have to raise rates, tolerate a weaker yen, sell US bonds or impose capital controls.
That dilemma highlights a broader dollar-system conflict: higher US rates support carry trades and pressure currencies like the yen even as Washington wants to avoid destabilizing Treasury markets.