{"id":843627,"date":"2026-08-04T21:20:09","date_gmt":"2026-08-04T21:20:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/843627\/"},"modified":"2026-08-04T21:20:09","modified_gmt":"2026-08-04T21:20:09","slug":"bessent-uses-moves-from-his-hedge-fund-days-to-prop-up-japans-yen-and-americas-national-debt","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/843627\/","title":{"rendered":"Bessent uses moves from his hedge fund days to prop up Japan’s yen\u2014and America’s national debt"},"content":{"rendered":"

Scott Bessent was in his early thirties, working at Soros Fund Management, when the Asian financial crisis tore through currency markets in 1997 and 1998\u2014a crisis he said was triggered, in part, by an overly weak yen. He was in his late twenties, working under George Soros and Stanley Druckenmiller, when they shorted the British pound and \u201cbroke the Bank of England<\/a>\u201d just a few years earlier.\u00a0<\/p>\n

Nearly three decades later, sitting in the Treasury secretary\u2019s chair, the former hedge fund manager is watching the Japanese yen wobble again, and this time it\u2019s his job to stop it rather than trade off it. It may be why he surprised the market with such a quick and bold move: the U.S. government\u2019s first joint currency intervention<\/a> with Japan since 2011 that helped the yen <\/a>rise on Monday.\u00a0<\/p>\n

\u201cThe fact that he clearly understands the yen in a way most Treasury secretaries or Fed chairmen would not definitely is part of the reason why you saw the reaction you did,\u201d said RSM\u2019s chief economist Joe Brusuelas<\/a>, who has analyzed U.S. monetary policy and international finance for two decades. \u201cAt least for now,\u201d Brusuelas told Fortune, \u201cinvestors are willing to cut him some slack when he takes risks that other Treasury secretaries over the past two generations wouldn\u2019t.\u201d<\/p>\n

From shorting the yen to make a fortune to buying the yen to ease debt pressure\u00a0<\/p>\n

Two things seem to give Bessent credibility in deciding whether or not to intervene with the yen: He helped engineer some of the most aggressive bets against foreign currencies in Wall Street history and made over 50 or 60 visits to Japan since 1989<\/a>, knowing the Bank of Japan governor for over 15 years.\u00a0<\/p>\n

\u201cJapan has come out of deflation and they\u2019re back, and I think here, we can give market signals,\u201d Bessent told CNBC<\/a> while explaining the Treasury\u2019s decision to buy the yen.\u00a0<\/p>\n

Hedge fund managers operate on a simple premise when it comes to currency: Governments and central banks will periodically try to hold it at a level the underlying economic conditions can\u2019t support, and eventually the market forces a correction. Bessent helped the legendary macro traders Soros and Druckenmiller spot that gap early to short the British pound when he was 29 years old. They pocketed $1 billion and became infamous for \u201cbreaking\u201d the Bank of England.\u00a0<\/p>\n

Bessent \u201ccould see the vulnerabilities in a way that most other people in the financial markets didn\u2019t see,\u201d David Smick, an adviser to Soros during the bet, told the New York Times<\/a>.\u00a0<\/p>\n

While critics viewed that bet as predatory profiteering at the expense of national economics, those same instincts\u2014identifying the true value of a currency\u2014are likely guiding Bessent\u2019s decisions now, as the Treasury said the yen was undervalued last month<\/a>.\u00a0<\/p>\n

This might have informed his decision to buy yen with euros instead of dollars, even though it drew backlash<\/a> from economists who said the intervention didn\u2019t make sense without fixing Japan\u2019s underlying fiscal issues. Bessent insists that the U.S. is optimistic about Japan\u2019s \u201cpolicy and fundamentals.\u201d<\/p>\n

Bessent also has U.S. interests to consider aside from evaluating Japan\u2019s economic conditions, which he did when shorting the yen as a hedge fund manager over a decade ago.\u00a0<\/p>\n

Brusuelas explained to Fortune that the timing of the intervention was harmonious to both the U.S.\u2019s and Japan\u2019s interests. The Treasury didn\u2019t want Japan\u2014which holds $1.1 trillion in U.S. Treasury bonds\u2014to dump them to buy yen, since that would have pushed U.S. interest rates even higher. The 30-year Treasury bond yield hit its highest level<\/a> since 2007 after the Fed left rates unchanged on July 29, arriving as national debt approaches $40 trillion<\/a>, over 100%<\/a> of national GDP.\u00a0<\/p>\n

How Japan\u2019s yen is tied to the $40 trillion national debt\u2014and the broader petrodollar system<\/p>\n

Foreign investors held roughly $9.5 trillion in U.S. Treasuries as of February, according to Treasury Department data\u2014money that helps finance a debt load now barreling toward $40 trillion. But who is supplying that financing has shifted dramatically over the past decade.\u00a0<\/p>\n

China, once the largest foreign creditor to the U.S., has been steadily retreating: Its holdings peaked near $1.32 trillion in November 2013 and have since been cut roughly in half, to around $693 billion, dropping Beijing to third place among foreign holders, behind Japan and the U.K.<\/p>\n

Japan, by contrast, has stayed put as the single largest foreign holder of U.S. government debt, which is part of why Washington was so eager to keep Tokyo from being forced into a sale of its own. Unlike with China, Japan\u2019s Treasury stockpile functions less like a geopolitical lever and more like the byproduct of a decades-old alliance and an export-driven economy that has to park its dollar earnings somewhere.<\/p>\n

\u201cBessent, being the hedge fund manager that he is, saw an opportunistic moment where he could damp yields along the curve, bolster the greenback, and provide support for one of the U.S.\u2019s primary allies,\u201d Brusuelas told Fortune. \u201cWashington saw an opportunity to support Japan in such a way that resulted in yields falling and prevented the broader dumping of the dollar.\u201d<\/p>\n

The dollar\u2019s role as the world\u2019s reserve currency rests heavily on the \u201cpetrodollar\u201d system, dating to a 1974 deal in which Saudi Arabia agreed to price its oil in dollars and recycle its surpluses into U.S. assets in exchange for an American security guarantee. That arrangement has been under strain this year with the war, with Iran<\/a> testing Washington\u2019s ability to guarantee safe passage through the Strait of Hormuz, and Deutsche Bank<\/a> has warned that reports of ships securing passage through the strait in exchange for payment in yuan could mark \u201cthe beginnings of the petroyuan.\u201d<\/a> <\/p>\n

With the situation in Iran and Hormuz still in flux\u2014Bessent seemed to cheer markets this week with news of another ceasefire deal close in the strait\u2014the weakening yen represented another crack in the still mighty status of the dollar.\u00a0<\/p>\n

But Mark Sobel, who served at the Treasury for nearly four decades, called Bessent\u2019s yen efforts \u201cill-advised\u201d even if the goal was tied to bond yields.\u00a0<\/p>\n

\u201cThe yen market is not disorderly, but instead reflects inconsistent macroeconomic policies requiring corrective Japanese actions which intervention is incapable of dealing with,\u201d Sobel told Fortune over email. \u201cIf his concern on the yen intervention involves somehow pushing back on or limiting rising U.S. Treasury yields, the best way to address that would be through fiscal consolidation.\u201d\u00a0<\/p>\n

This term refers to the federal government using taxes or spending changes to reduce debt, but Brusuelas told Fortune that the reason Bessent \u201cwill be given a much wider berth when it comes to interventions in the market\u201d is that the country is under a new economic framework.<\/p>\n

\u201cWe now are under a populist framework,\u201d Brusuelas said. \u201cWe are not in the free-market globalization framework that I would say existed from 1990 to 2017, and so he\u2019s operating in a different way.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Scott Bessent was in his early thirties, working at Soros Fund Management, when the Asian financial crisis tore…\n","protected":false},"author":2,"featured_media":843628,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164,941,16740],"class_list":["post-843627","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy","tag-japan","tag-scott-bessent"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/843627","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=843627"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/843627\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/843628"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=843627"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=843627"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=843627"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}