U.S. Treasury Secretary Besant is making his third visit to Japan in just over a year, arriving at a particularly sensitive moment—Tokyo is suspected of having recently intervened in the currency market with up to 10 trillion yen (approximately $64 billion) to forcibly support the yen, a practice Besant has publicly criticized.
According to his itinerary posted on platform X, Besant is scheduled to meet with Japanese Prime Minister Hayashi and Finance Minister Satsuki Katayama this Tuesday. Besant has long advocated that Japan should address yen weakness through interest rate hikes by the Bank of Japan, rather than through market intervention. His arrival coincides with heightened sensitivity around the yen issue, and analysts expect the language of the negotiations to be notably firm.
The direction of Japan's fiscal and monetary policies has direct implications for the U.S. Treasury market. Japanese intervention typically requires selling U.S. Treasuries to raise funds, thereby pushing up U.S. bond yields; simultaneously, the ongoing rise in Japanese government bond yields could also transmit shockwaves to global fixed-income markets. Besant has identified the 10-year U.S. Treasury yield as one of his most critical market indicators; any upward pressure originating from Japan would further complicate the policy objectives of the current U.S. administration.
In the view of analysts, the outcome of this visit is significant. "There is no doubt that every word and action from Besant regarding Japan carries immense weight," said Chotaro Morita, Chief Strategist at All Japan Asset Management with over thirty years of Japanese market research experience. "If he escalates the pressure, Japan has very little room to rebut."
10 Trillion Yen Intervention and Visit Pressure Make Divergence Unavoidable Japanese authorities have been widely believed by the market to have conducted multiple large-scale purchases of yen recently. Reports indicate the total recent intervention amounts to approximately 10 trillion yen, a rare scale of force. However, Besant holds clear reservations about this approach, preferring that the yen find an appropriate level naturally through the normalization of Bank of Japan policy, rather than through direct administrative market support.
In fact, last August, Besant publicly stated that "Japan has an inflation problem" and criticized the Bank of Japan for being "behind the curve" on raising interest rates. During his visit to Tokyo in October of the same year, he publicly called on the Hayashi administration to provide space for the Bank of Japan to combat inflation, just one day before a central bank policy announcement.
Morita noted that regarding the Bank of Japan's rate-hike process, Besant has long believed the pace is too slow. "He understands the country, but that doesn't mean he will take a friendly stance."
Davos Incident: The Meeting That Was "More Like a Reprimand" During the World Economic Forum in January this year, significant volatility in the Japanese government bond market spread to U.S. Treasuries, coinciding with Besant's high-profile attendance at Davos. According to sources familiar with the matter who spoke to media, Besant's meeting with Finance Minister Katayama on the sidelines of the forum resembled a formal reprimand more than a routine exchange.
One source described Besant speaking at a rapid pace, laying out a series of demands that left Katayama's note-taker struggling to keep a complete record. The source did not disclose the specific content of the demands.
Simultaneously, Besant applied public pressure. In an interview with Fox Business, he stated he had communicated with Japanese officials and "believed" both sides would act jointly to calm market volatility. Shortly afterward, Katayama publicly called for market calm, emphasizing that Japan is pursuing "responsible and sustainable" fiscal policy, which somewhat stabilized investor expectations regarding Japan's fiscal plans.
An Unexpected American "Endorsement": Authorizing a Rate Check Just days after that tense Davos meeting, Besant took a move that surprised the market—authorizing a so-called "rate check," sending a warning signal to market dealers about potential intervention. This helped Japan temporarily dispel speculative pressure without actually using foreign exchange reserves, buying the yen some breathing room.
Atsushi Takeuchi, former head of the Bank of Japan's foreign exchange department who executed forex interventions for the Ministry of Finance from 2010 to 2011, was deeply astonished. "Probably no one in the market had ever heard of the U.S. conducting a rate check for the yen. The implications are extremely profound," he said. "Even when I held that position, I never considered that option."
However, this assistance does not contradict Besant's fundamental stance on Japanese economic policy—he still believes the exchange rate should move towards a reasonable level through the Bank of Japan's gradual interest rate hikes, not reliance on intervention operations.
The Linkage Between JGBs and U.S. Treasuries: Besant's Most Feared Transmission Channel Underlying this visit is a consistent market logic chain: rising Japanese government bond yields directly threaten the stability of the U.S. Treasury market.
Last month, Japan's 10-year government bond yield rose to its highest level since 1997, while market expectations for a Bank of Japan rate hike next month continue to build. Japanese authorities typically raise funds for market intervention by selling U.S. Treasuries, an action that directly pushes up U.S. bond yields. At the same time, as domestic interest rates rise in Japan, the incentive for Japanese investors to increase allocations to foreign assets—including U.S. Treasuries—may also weaken.
"Japan is in the middle of a transformation of its economic regime," said Tim Adams, CEO of the International Institute of Finance (IIF). The Bank of Japan's gradual exit from ultra-loose monetary policy "is changing the global equilibrium." He noted that the "potential repatriation of Japanese capital" has profound implications for global markets, including U.S. Treasuries, and that "the Treasury Department needs to track this shift closely." Adams previously served as U.S. Under Secretary of the Treasury for International Affairs.
A 35-Year Connection: From the Bubble Era to the Abenomics Wager Besant's deep involvement with the Japanese market stems not just from his official role but is rooted in thirty-five years of personal observation and investment practice.
Recalling on a podcast, he first arrived in Japan in 1990 at the tail end of the bubble economy. He stayed at Tokyo's renowned Okura Hotel for about three months, with a nightly rate of $500. By 2011, the rate at the same hotel had fallen to $350—"That says it all," he said. "I saw the rise, I saw the fall, and then the long stagnation."
A turning point came in 2012. Besant, accompanying his boss, billionaire hedge fund legend George Soros, met with economics professor Koichi Hamada—one of then-Prime Minister Shinzo Abe's key advisors—at Yale University. Hamada outlined early concepts of what would later become "Abenomics." "If these policies were implemented, the magnitude of the market's potential move was getting me more and more excited," Besant recalled in a 2022 article for the International Economy journal, stating he told Soros this would be a "once-in-a-lifetime trade." Soros subsequently made roughly $1 billion betting against the yen.
By 2022, Besant judged that the Bank of Japan had entered the "endgame" of its ultra-loose policy. His macro fund, Key Square Capital Management, posted returns of about 30% that year, with yen bets contributing significantly. This visit will mark his 54th trip to Japan since 1990.
Ken Weinstein, Chair of Japan Studies at the Hudson Institute, described Besant's understanding of Japan as "unprecedented" among Treasury Secretaries. "A Japanese finance minister usually holds an information advantage over a U.S. Treasury Secretary when dealing with Japan issues, but when Besant is present, that advantage shrinks considerably," Weinstein said.
Hayashi's Dilemma: Washington's Support is Also a Constraint For Japanese Prime Minister Hayashi, Besant's intense focus is a double-edged sword.
On one hand, Besant's visit to Tokyo sends a political signal to Japan: Washington has not neglected its important Asian ally. On the other hand, Besant's forceful involvement in Japan's economic policy continues to compress the Hayashi administration's domestic policy autonomy.
Hayashi has previously pushed for expansionary fiscal policy and once discussed cutting the sales tax—stances that have persistently raised investor concerns that Tokyo may be underestimating the potential long-term inflationary impact of a loose fiscal path. However, as progress on a temporary food sales tax reduction plan has been slow with no clear timeline, related worries have eased somewhat. Hayashi's overwhelming victory in the House of Representatives election this February also bolstered market confidence to a degree.
In a Bloomberg interview at Davos, Finance Minister Katayama insisted that Japan remains a strong "buy" for global investors, arguing that tax revenue growth from economic expansion, combined with spending optimization, would allow the government to advance key industry investments without issuing new bonds beyond the budget.
Yet the upward trend in Japanese bond yields has not ceased, retaining its potential to transmit to U.S. Treasuries. Besant is acutely aware of the stakes involved; this trip is by no means a courtesy visit.
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