Besson is going to Japan again. Japan just spent 10 trillion to intervene in the foreign exchange market. How will he exert pressure this time?

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U.S. Treasury Secretary Besant visited Japan for the third time in just over a year in office, and the timing of this trip is particularly sensitive—Tokyo has recently been suspected of intervening in the market with as much as 10 trillion yen (about $64 billion) to forcibly support the yen’s exchange rate, a practice that Besant has publicly criticized.

According to Besant’s itinerary posted on X, he will meet this Tuesday with Japanese Prime Minister Sanae Takaichi and Finance Minister Satsuki Katayama. Besant has long advocated that Japan should deal with yen weakness by raising the Bank of Japan’s interest rates, not through market intervention. His visit comes amid heightened sensitivity over the yen issue, and analysts expect both sides to take a noticeably tough tone in negotiations.

The direction of Japan’s fiscal and monetary policy has a direct impact on the U.S. Treasury market. Japan’s intervention typically requires selling U.S. Treasuries to raise funds, thus pushing up U.S. Treasury yields; at the same time, the continued rise of Japanese government bond yields may also send shockwaves through the global fixed income market. Besant has called the 10-year Treasury yield his most important market indicator, and any upward pressure from Japan will make the Trump administration’s policy goals even more complex.

Analysts believe the outcome of this visit is of great significance. "Without a doubt, every word Besant says to Japan is crucial," said Chotaro Morita, chief strategist at All Japan Asset Management who has conducted Japanese market research for over thirty years. "If he increases the pressure, Japan will have almost no room to object."

10 Trillion Yen Intervention Plus Visit Pressure: Disagreements Unavoidable

Japanese authorities have recently been widely believed by the market to have repeatedly intervened on a large scale to buy yen. Reports say recent intervention amounts total about 10 trillion yen, an unusual degree of involvement. However, Besant takes a clear position against this path, preferring the yen to find the right level naturally as BOJ policy normalizes, rather than being buoyed by direct administrative actions.

In fact, as early as last August, Besant publicly stated that “Japan has an inflation problem” and criticized the Bank of Japan for being “behind the curve” on rate hikes. On his visit to Tokyo that October, he went further, publicly urging the Takaichi administration to give the BOJ space to fight inflation a day before the BOJ’s policy announcement.

Morita pointed out that Besant has long believed the BOJ’s rate hike pace is too slow. “He understands this country, but that doesn’t mean he will take a friendly stance.”

Davos Turmoil: A Meeting “More Like a Scolding”

During this January’s World Economic Forum, Japan’s government bond market experienced major turmoil that spread to U.S. Treasuries, coinciding with Besant’s high-profile attendance at Davos. According to sources, Besant’s meeting with Katayama during the forum was more like a formal scolding than a routine exchange.

One person described Besant as speaking very rapidly and continuously making numerous demands, leaving Katayama’s aide unable to keep up and take full notes. The actual content of the demands was not disclosed.

Meanwhile, Besant also applied public pressure. In a Fox Business interview, he said he had communicated with Japanese officials and “believed” both sides would cooperate to calm market volatility. Not long after, Katayama publicly called on the market to remain calm, emphasizing that Japan was pursuing a “responsible and sustainable” fiscal policy, partially stabilizing investor expectations for Japan’s fiscal plans.

Unexpected U.S. "Backing": Authorization of Rate Check

Just days after that tense meeting in Davos, Besant made a surprising move—authorizing the so-called "rate check", sending a warning signal to market dealers about possible intervention, helping Japan temporarily dispel speculative pressure on the yen without actually using foreign reserves.

Atsushi Takeuchi, former head of the forex division at the BOJ, who executed interventions for the Ministry of Finance from 2010 to 2011, was shocked. “No one in the market has ever heard of the U.S. conducting a rate check for the yen before, the implications are enormous,” he said. “Even when I had that job, I never thought of that option.”

However, this assistance does not contradict Besant’s fundamental position on Japan’s economic policy—he still believes the yen should return to a reasonable level mainly through a gradual BOJ rate hike, not through intervention.

The Japan-U.S. Bond Linkage: Besant's Main Concern

Behind this visit lies a consistent market logic: the rise in Japanese government bond yields directly threatens the stability of the U.S. Treasury market.

Last month, Japan’s 10-year government bond yield rose to its highest level since 1997, and market expectations are increasing for a BOJ rate hike next month. Japanese authorities typically sell U.S. Treasuries to raise intervention funds, directly pushing up Treasury yields. Meanwhile, as Japanese domestic interest rates rise, the incentive for Japanese investors to allocate more to overseas assets—including U.S. Treasuries—may also decline.

"Japan is in the midst of an economic transformation," said Tim Adams, CEO of the Institute of International Finance (IIF). The BOJ’s gradual exit from ultra-loose policy “is changing the global balance.” He noted, “the potential repatriation of Japanese capital” has far-reaching implications for global markets including U.S. Treasuries, and “the Treasury needs to closely track these changes.” Adams previously served as Undersecretary of Treasury for International Affairs.

35-Year Bond: From the Bubble Era to the Abenomics Gamble

Besant’s deep involvement with the Japanese market is not only official, but rooted in 35 years of personal observation and investment practice.

He recalled in a podcast that when he first arrived in Japan in 1990, it was at the tail end of the bubble economy. He stayed for about three months at the famous Okura Hotel in Tokyo, where the nightly rate was as high as $500. By 2011, the same hotel charged only $350 a night—“That says it all,” he said. “I witnessed the rise, the fall, and then the long stagnation.”

The turning point came in 2012. Besant, along with his boss, billionaire hedge fund legend George Soros, met with Yale University economist Koichi Hamada—one of then-Prime Minister Shinzo Abe’s core advisors. Hamada explained the early concept of what later became “Abenomics”. “If these policies were implemented, the magnitude of the market movement had me growing excited,” Besant recalled in a 2022 International Economy article, saying he told Soros it would be a “once in a lifetime trade.” Soros subsequently made roughly $1 billion betting against the yen.

By 2022, Besant judged the BOJ had entered the "endgame" of ultra-loose policy; his macro fund, Key Square Capital Management, gained about 30% that year, with the yen bet a major contributor. This trip brings his total visits to Japan since 1990 to 54.

Ken Weinstein, Chairman of the Hudson Institute's Japan Studies, described Besant’s understanding of Japan as “unprecedented” among Treasury Secretaries. “A Japanese finance minister usually has an information advantage when dealing with U.S. Treasury Secretaries on Japan-related issues, but with Besant in the room, that advantage is greatly reduced,” Weinstein said.

Takaichi’s Dilemma: Washington’s Support is also a Constraint

For Japanese Prime Minister Sanae Takaichi, Besant’s intense focus is a double-edged sword.

On one hand, Besant’s visit sends a political signal that Washington hasn’t ignored its important Asian ally. On the other, his strong involvement in Japan’s economic policy has increasingly limited Takaichi's administration's domestic policy autonomy.

Takaichi previously pushed expansionary fiscal policy and even discussed cutting the sales tax—positions that have fueled investor concerns that Tokyo may underestimate the long-term inflation risks of a loose fiscal stance. However, as progress has stalled on the temporary food sales tax cut, and no clear timeline has emerged, related concerns have eased. In February, Takaichi's overwhelming victory in the lower house elections further stabilized market confidence.

In a Davos interview with Bloomberg, Katayama insisted that Japan remained a strong "buy" for global investors, with rising tax revenue from economic growth and optimized spending, making increased government bond issuance unnecessary for advancing key industrial investment plans.

However, the uptrend in Japanese government bond yields remains, continuing to carry the potential to affect U.S. Treasuries. Besant is well aware of these stakes, and this visit is far from ceremonial.

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