When sovereigns buy and sell

Treasury Secretary Scott Bessent has confirmed, per CNBC, that the United States bought yen alongside Japan to reduce currency volatility and stabilize Asian markets. Let us take the claim at face value and ask the question that claim invites: when a sovereign enters the market not as regulator but as participant — as buyer and seller of money itself — whose interests are served, and what discipline remains on the sovereign's own conduct?

I have always maintained that free exchange under the rule of law produces gains for both parties, and that mercantile restrictions are, at bottom, a tax on the consumer levied for the benefit of a narrow producer interest. Currency manipulation — whether by a trading nation depressing its exchange rate to cheapen its exports, or by a rival power buying that nation's currency to prevent it — is a species of the same problem. It distorts the price at which goods and labor meet across borders. The consumer in every country pays the hidden cost.

Yet I am not so rigid as to say the sovereign must stand entirely aside. There are public goods that markets, left without a framework, cannot supply. Defense is the first of them; I said as much in the Wealth of Nations. Monetary order — a stable medium in which contracts can be made and honored — functions in much the same way. A currency in free fall, or one artificially compressed by a foreign power, undermines the very framework within which honest exchange is possible. On that ground, a measured intervention to restore order has a defensible claim.

The peril lies, as ever, in the merchant interest capturing the sovereign's hand for its own purpose. If the United States bought yen to stabilize Asian markets broadly — to preserve the institutional conditions in which trade can be conducted honestly — that is one thing. If it did so to advantage particular exporters, to punish a rival, or to secure concessions in an ongoing negotiation, it is quite another. Bessent's stated rationale, as reported by CNBC, is the former. I mark it as inference, not recollection, that the reality may be more complicated than the public statement.

The deeper lesson is institutional. A single act of currency coordination, openly stated and aimed at stability, is not the same as a standing policy of manipulation. What makes the difference is transparency, the rule of law, and the discipline of treaty and multilateral agreement. The International Monetary Fund and the frameworks of international monetary order exist precisely to prevent every sovereign from treating the exchange rate as a private instrument of mercantilist advantage. The question I would put to Mr. Bessent is not whether he bought yen, but whether the action was taken within those frameworks or around them. The former is prudence; the latter is the behavior of the very mercantile factions I spent the better part of my working life warning the public against.