US Treasury Secretary Scott Bessent stated on Tuesday that the weakening yen has exacerbated Japan's inflation issues and increased the risk of broader currency depreciation across Asia, while reaffirming US support for exchange rate stability efforts.

Bessent said in an interview that the yen's current level could trigger other problems or lead to competitive devaluation, which is unhealthy. He emphasized that a stable yen is critical not only for the United States but also for the entire Asian region.

This statement comes after the US and Japan jointly intervened in the foreign exchange market last week to support the yen, which had recently fallen to its lowest level against the dollar in four decades.

When asked whether the US would intervene further, Bessent indicated that Washington remains in close contact with Japanese authorities, pledging to support them in ways that benefit the US economy, American taxpayers, and global economic stability.

Following the joint intervention, the yen rebounded sharply, but its rally paused on Tuesday, trading around 157.54 yen per dollar. On July 23, the yen had fallen to nearly 164 per dollar, its weakest level since 1986.

Bessent noted that part of Japan's inflation problem stems from rising energy costs, which are transmitted through yen weakness. He also warned that if the yen weakens significantly, other currencies would follow, citing excessive volatility in the Korean won and suggesting that many believe the Chinese yuan is undervalued.

With decades of hedge fund foreign exchange trading experience before becoming Treasury Secretary, Bessent explained that currency intervention can send a market signal, but ultimately, policies are needed to reverse the situation. He mentioned that Japanese Prime Minister Sanae Takaichi's government is moving toward budget discipline, including achieving a primary surplus.

When asked whether stabilizing the yen would require Bank of Japan rate hikes, Bessent said he would not prejudge what the central bank should do. He noted that he has known BOJ Governor Kazuo Ueda for 15 years and expressed confidence that Ueda would take necessary actions.

Bessent stated that intervention must be followed by policy follow-through, and he expressed strong confidence that this would be seen.

Regarding the discovery last Friday that his notebook listed "Buy JPY" as a to-do item during a cabinet meeting, Bessent hinted that this was an intentional signal. He said he simply wanted to ensure that all journalists observing from behind knew that "JPY" stands for the Japanese yen.

When asked about reports that the US used euros to purchase yen during last Friday's intervention, Bessent said Washington remains in close contact with European partners, including central banks and some finance ministers. He assured them that this was merely a reallocation of US reserve assets, adding that in his view, the euro is closer to its equilibrium price, while the problem is that the yen is significantly undervalued.