US Treasury Secretary Bessent: Yen Intervention Profits in Tens of Millions of Dollars
US Treasury Secretary Bessent stated at a congressional hearing that recent interventions in the yen exchange rate have generated paper profits amounting to tens of millions of dollars. He also addressed topics such as AI regulation, US debt buybacks, and aid to Argentina during the same hearing.
Bessent mentioned that the US used "notional amounts" for the yen intervention, although the specific scale of operations was not disclosed, the resulting profits reached tens of millions of dollars. He emphasized that the US maintains a continuous bilateral communication mechanism with Japan regarding exchange rate interventions, rather than unilateral surprise actions.
Bessent also noted that a stronger yen benefits US exporters by reducing the price disadvantage of US goods relative to Japanese products. He pointed out that yen appreciation means the Japanese government does not need to sell US assets (such as US Treasuries) to intervene in the currency market, which objectively reduces the pressure on Japan to sell US Treasuries.
Regarding Argentina, Bessent revealed that past US aid operations to Argentina also brought tens of millions of dollars in profits to the US government, which he cited as a historical example of the Treasury's external interventions being "profitable."
On domestic fiscal operations, Bessent confirmed that the Treasury's debt buyback intervention plan has been "successful." He also stated that the funding offset plan for $5,000 checks is "in progress," but did not provide specific funding sources or timelines. On the topic of AI, Bessent stated that innovation and safety need to be addressed simultaneously, urging lawmakers not to exempt AI from liability and opposing giving AI companies a "blank check" for liability, calling it "one of the most important struggles of a lifetime."
From a market mechanism perspective, the profits from yen intervention mean that the US Treasury has played a role in selling dollars at high prices and buying yen at low prices in the foreign exchange market, with paper profits typically realized during position adjustments or valuation reassessments. The beneficiaries of a stronger yen are US export-oriented companies (improved relative price competitiveness), while the external effect on Japan is a reduction in the motivation to sell US Treasuries, thereby alleviating supply-side pressure on US Treasuries and providing marginal support for US Treasury purchases. The debt buyback operation involves the Treasury buying back less liquid old bonds and replacing them with newly issued bonds that are more liquid, aimed at lowering financing costs and stabilizing the yield curve. Both operations target the goal of lowering long-term financing costs in the US.
Currently, the specific notional amounts, timing of interventions, and yen trading price ranges have not been disclosed in the public hearing records, and the relevant scale remains described as "tens of millions of dollars."
Source: Public Information
ABAB AI Insight
Bessent's most notable operation during his career occurred at Soros Fund Management: in 1992, he was a core member of the team that shorted the pound, forcing the UK to exit the European Exchange Rate Mechanism (ERM). In 2013, while managing Soros's macro fund, he bet on yen depreciation, profiting from shorting the yen during Shinzo Abe's "Abenomics" which pushed the Bank of Japan into aggressive easing, and was referred to by the media as one of the traders involved in "breaking the yen." He left Soros in 2015 to establish his own macro hedge fund, Key Square Group.
From shorting the yen for arbitrage to now personally intervening in the yen exchange rate as US Treasury Secretary and publicly claiming profits, Bessent's capital path reflects a role transition from "exploiting exchange rate misalignments" to "managing exchange rates on behalf of the sovereign balance sheet." His motivation, beyond the paper profits from the exchange rate itself, is more crucially to alleviate the pressure on Japan to reduce its holdings of US Treasuries through a strong yen, providing support for overseas purchases of US Treasuries, which aligns with his concurrent debt buyback operations—stabilizing Japan's willingness to hold US Treasuries, while simultaneously using buyback operations to alleviate supply-side pressure on US Treasuries, both serving the goal of lowering long-term financing costs in the US.
The role of the "Treasury Secretary personally engaging in currency trading judgments" is not new; historical precedents include the "strong dollar" policy during the Rubin and Summers eras, as well as verbal interventions typical of Japanese finance officials. What sets Bessent apart is that he was once a currency speculator from Wall Street hedge funds, now transformed into a currency policy maker and executor, giving the US Treasury's foreign exchange communication a stronger "know thyself and know thy enemy" flavor. It currently resembles a shift from mere verbal communication to a "hybrid" exchange rate management phase that combines substantial interventions with balance sheet operations.
This essentially represents an overlap of "pricing power transfer" and "capital concentration": on one hand, the US Treasury influences the yen/USD exchange rate pricing through actual interventions rather than relying solely on verbal communication, weakening the dominance of purely market-driven pricing; on the other hand, the combination of debt buybacks and exchange rate interventions re-concentrates the pricing power and exchange rate risks of US Treasuries, which were originally dispersed in the open market, back into the Treasury's balance sheet operations. The mechanism behind this shift is that as fiscal deficits and refinancing pressures rise, relying solely on public market issuance has become insufficient to stabilize long-term rates, prompting the Treasury to utilize exchange rate tools (to alleviate the selling motivation of foreign official holders) and debt management tools (buybacks) in tandem, partially transferring the pricing process that would have been spontaneously formed by the market back into the hands of policymakers.
ABAB News · Cognitive Laws
Verbal intervention is psychological warfare; real operations are true transactions.
Once a speculator, best understands how to end speculation.
Alleviating others' selling pressure is delaying one's own debt repayment.