By David Lawder and Doina Chiacu
WASHINGTON, Aug 4 (Reuters) - The U.S. will do "whatever it takes" to support Japan's effort to stabilize the yen, Treasury Secretary Scott Bessent said on Tuesday, following last week's joint intervention by Washington and Tokyo to buy the Japanese currency.
"We will do whatever it takes to support them in a way that helps the American economy, the American taxpayer," Bessent said in an interview on CNBC two days after confirming the Treasury had joined Japan's finance
authorities in an intervention on Friday to prop up the yen.
Bessent said the yen's substantial undervaluation could trigger other economic problems or competitive devaluations of other currencies, "which is unhealthy."
Prior to Bessent's remarks, the yen had dipped to 158 to the dollar from Monday's immediate post-intervention levels of about 156. After his comments, the yen recovered slightly to 157.55, still well off recent 40-year lows of about 164.
The U.S. Treasury chief did not discuss the mechanics of U.S. participation in the joint intervention with Japan on Friday.
He said he was happy that the Japanese government wants to use a pandemic-era Federal Reserve backstop for key central banks, the Foreign and International Monetary Authorities Repo Facility, which would allow the Bank of Japan to borrow up to $60 billion to support the yen.
"The FIMA facility was done in 2020, the size of the bond market was much smaller then, so I think it would be reasonable for the Fed to consider upsizing the facility," Bessent said, adding that its purpose was to "protect the U.S. economy and keep any volatility offshore."
Regarding U.S. sales of euros to buy yen, Bessent said he had reassured European partners including central banks that the U.S. move was "just a reallocation of our resources."
"Seems to me the euro is much closer to an equilibrium price," Bessent said. "I'm not going to talk about where the euro should or should not trade, but it's really the substantial undervaluation of the yen here and the policies that the Takaichi government is putting in place to change that."
DEFYING ECONOMIC GRAVITY
Former U.S. Treasury Secretary Timothy Geithner, who oversaw U.S. participation in a G7 joint yen sale after a devastating 2011 earthquake, told CNBC later on Tuesday that intervention can help, "but it only really works if it's a bridge to policy or if it's working with the underlying direction of policy over time."
Geithner, who served during Barack Obama's first presidential term, said financial markets anticipate that Japan will need to follow through with an interest rate hike.
"That'll help reinforce the objectives of this intervention in some sense," Geithner added. "And if intervention is coordinated by the major powers, it could be more effective. So there's a chance this would be effective."
Henry Paulson, Geithner's predecessor as Treasury secretary and a partner in the 2008 financial crisis response, said on the same CNBC program that it was difficult for Japan "to defy economic gravity" due to its high debt levels and a perceived need for higher interest rates that are at odds with Prime Minister Sanae Takaichi's expansionary policies.
But Paulson said it was important that the U.S. support a partner like Japan, adding: "It's in our interest and in their interest. We don't need them selling Treasuries right now."
'TO DO' LIST ON DISPLAY
Asked about the recent Reuters photo of his "to do" list containing the words, "Buy Japanese yen (JPY) $5-10 bil," Bessent said it was visible on a Trump administration cabinet meeting conference table on Friday at Camp David in Maryland.
"I just wanted to make sure that all the reporters looking on over my shoulder also knew the symbol JPY for the Japanese yen," he said.
Bessent also joked that he wanted to finish the list with items including, "go and have lunch with the (Iranian) supreme leader, play tennis with Putin, you know. But I thought I would just leave it at the buy five to 10 billion (dollars) of Japanese yen."
(Reporting by David Lawder, Doina Chiacu and Dan Burns; additional reporting by Michael S. Derby, Editing by Louise Heavens, Andrea Ricci and Paul Simao)
