--- title: "Bessent Fails to Stabilize Markets; Japan Risks Repeating the \"1997 Asian Financial Crisis\"" type: "News" locale: "en" url: "https://longbridge.com/en/news/296666103.md" description: "The U.S. Treasury's attempt to stabilize long-term interest rates through bond buybacks has yielded poor results, leading to a synchronized decline in U.S. stocks, bonds, and the dollar. Nomura warns that if Japan emulates this strategy to lower long-term financing costs, pressure could shift to the foreign exchange market, triggering yen depreciation and even risking a repeat of the 1997 Asian Financial Crisis. Market concerns persist that this approach delays monetary policy normalization, while Bessent's downplaying of inflation risks has further exacerbated uncertainty" datetime: "2026-08-22T04:14:04.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296666103.md) - [en](https://longbridge.com/en/news/296666103.md) - [zh-HK](https://longbridge.com/zh-HK/news/296666103.md) generator: "portal-rs" --- # Bessent Fails to Stabilize Markets; Japan Risks Repeating the "1997 Asian Financial Crisis" This week, the U.S. market experienced a rare simultaneous downturn in stocks, bonds, and currencies: U.S. equities, Treasuries, and the dollar all weakened, while the yen also failed to escape the slump. Investors are beginning to question the effectiveness of the U.S. Treasury's policy attempts to stabilize long-term interest rates through bond buybacks and supply management. Nomura macro strategist Naka Matsuzawa believes that **the "Bessent Put," an attempt by Bessent to suppress long-term yields by expanding Treasury buybacks, is failing. Policy intervention has not only failed to sustain stability in the bond market but has also increased downward pressure on the dollar.** On Wednesday, the U.S. Treasury announced it would "at least double" the scale of buybacks for 10- to 30-year Treasuries, just two weeks after the last announcement of its buyback plan. However, the policy's support for the market lasted less than a day: long-term Treasury yields briefly fell before quickly rebounding, ending the week essentially flat. More alarmingly, the U.S. policy path could serve as a cautionary tale for Japan. Matsuzawa warned that **if Japan also uses bond supply management to lower long-term financing costs,** **pressure could shift from the bond market to the forex market, ultimately manifesting as yen depreciation; if market confidence deteriorates further, it could trigger capital outflows, even posing risks similar to those seen during the 1997 Asian Financial Crisis.** ## Bessent Downplays Inflation Risks; Market Worries That Being "Behind the Curve" Will Be Harder to Correct The market's interpretation of Bessent's moves has been quite negative, with the dollar reacting even more sharply than Treasuries, showing significant weakness. **The market is concerned that if the Treasury stabilizes the bond market through supply and demand adjustments, the process of catching up to being "behind the curve"—which would normally require measures such as rate hikes—could be further delayed, potentially keeping monetary policy accommodative for longer.** Bessent previously stated publicly that market concerns about inflation were "not aligned with fundamentals," arguing that current inflationary pressures mainly stem from energy and are temporary factors. This judgment may imply that he has underestimated the potential impact of AI on economic growth, inflation, and the supply-demand dynamics of capital. The FOMC minutes released by the Federal Reserve this week also showed that **officials remain significantly divided on whether inflationary pressures brought by AI will spread broadly, with no consensus yet formed.** ## Beware of the "Bessent Put" Repeating Mistakes: Suppressing Long-Term Yields Could Backfire on the Yen The report specifically warns that **Japan should view the failure of the U.S. "Bessent Put" as a cautionary tale rather than remaining on the sidelines.** The yen remained weak this week, but Japanese stocks suffered the largest decline among G3 markets, falling 3.3%, compared to drops of 1.9% in the U.S. and 1.1% in Europe. Meanwhile, the 10-year U.S. Treasury yield rose by 1 basis point, European government bond yields rose by 5 basis points, while the Japanese 10-year government bond yield actually fell by 3 basis points. This divergence partly reflects changing market expectations regarding Japanese policy. **The issue is that if Japan emulates the U.S. by using supply and demand measures, such as reducing long-term government bond issuance, to suppress bond yields, the side effects may be released in the form of yen depreciation.** Since the Bank of Japan holds nearly 50% of the Japanese government bond market, its control over the bond market is actually far stronger than that of the Federal Reserve, but this also means that market distortions may be more evident in the exchange rate. Even more alarming is that the yen is already a weak currency, unlike key reserve currencies such as the dollar. Matsuzawa likened the current environment to the backdrop of the intensifying Asian currency crisis during the 1990s tech boom, pointing out that **if Japanese policy deviates, there is a high risk that Japan will transform from a destination for capital inflows into a source of capital repatriation.** In this context, he believes that Japan must at least clearly signal an abandonment of large-scale policy credit aimed at fighting inflation, which is the minimum necessary condition to stabilize market expectations. ## Expectations for BOJ Rate Hikes Rise; AI Capital Expenditure Intensifies Competition for Credit Market Funds This week, market pricing for the Bank of Japan's rate hike path further intensified: **the probability of a rate hike in September rose to approximately 80%, with three future rate hikes already priced in, expecting the policy rate to eventually reach 1.75%; the expected final interest rate in Japan (2-year forward OIS) also rose from 2.19% to 2.23%.** Recent signals from the Bank of Japan have indeed been hawkish, with the market even beginning to discuss accelerating the pace of rate hikes. However, Nomura believes that the Japanese economy still retains some resilience. Deputy Governor Hisashi Takeuchi's remarks may further reinforce expectations for a September rate hike, but this does not necessarily mean the Bank of Japan will commit to a faster hiking pace. Therefore, given that the market has already heavily priced in these expectations, even if the September rate hike materializes, it may not constitute a new positive catalyst. In contrast, what is more worthy of attention is **the competition for funds between corporate bonds of technology companies and government bonds**. Credit default swap (CDS) spreads for some hyperscalers have risen to historical highs, reflecting growing market concern that massive AI capital expenditures are squeezing corporate financing capabilities. The high capital demands of AI investment are transmitting to the credit market, competing with government bond financing for funds. Although the U.S. earnings season has further validated the support of AI investment for corporate profits and capital expenditures, if the tech corporate bond market remains under pressure, changes in financing costs and risk appetite could conversely affect the stock market. Therefore, **whether tech corporate bonds can stabilize will become an important external indicator for whether the stock market can hold its ground next week.** Furthermore, **Christopher Waller's remarks on balance sheet policy (QT) at the Jackson Hole Annual Symposium are also worth watching.** If he signals a continued contraction of the balance sheet to avoid injecting excessive liquidity into financial markets, it could further tighten the liquidity environment and exert pressure on equity markets. His consistent stance warning against excessive liquidity causing asset price distortions makes this risk particularly noteworthy. Risk Warning and Disclaimer Investing involves risks; please proceed with caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment decisions made based on this content are the sole responsibility of the investor. ### Related Stocks - [NMR.US](https://longbridge.com/en/quote/NMR.US.md) - [8604.JP](https://longbridge.com/en/quote/8604.JP.md) ## Related News & Research - [REG - Nomura Intl. 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