Meeting Between Japanese Finance Minister and U.S. Treasury Secretary

By Leika Kihara

On Thursday, Japanese Finance Minister Katsunobu Kato met with U.S. Treasury Secretary Scott Bessent in Washington. They agreed to continue “constructive” dialogue on currency policy but did not discuss specific currency targets or frameworks to manage yen fluctuations.

Kato shared updates on Japan’s economic progress, including recent wage increases, during their first face-to-face meeting. They reaffirmed the G7 consensus that exchange rates should be market-driven and acknowledged that excessive currency volatility could harm economic stability. However, Kato mentioned there was no talk regarding whether recent yen movements were excessive.

When questioned about any criticism from Bessent regarding the weak yen or potential currency manipulation by Japan to boost exports, Kato stated, “There was absolutely no discussion on a target for exchange-rate levels or a framework to manage currency moves.”

The U.S. Treasury had not released a statement on the meeting by late Thursday. While separate bilateral discussions on tariffs are ongoing, the topic of currency rates remains set aside for future discussions between the finance leaders. Given this context, the meeting was closely watched by the markets,
where there were speculations that Washington might pressure Japan to strengthen the yen to reduce the U.S. trade deficit.

Market expectations regarding Japan facing pressure to increase the yen’s value have risen since President Trump took office, which has led to the yen appreciating by about 9% against the dollar since January.

A senior Japanese finance ministry official mentioned that no specific date for a follow-up meeting between Kato and Bessent has been established. Kato refrained from commenting on any follow-up actions concerning the meeting’s outcomes.

Sources indicate that Japanese policymakers do not foresee the possibility for immediate interventions or interest rate hikes from the central bank. Japan’s last currency market intervention occurred in 2024, aiming to support a weak yen.

With the dollar diminishing against various currencies, the yen has risen to around 142 per dollar. Japanese officials are concerned that additional efforts to strengthen the yen could narrow margins for exporters amidst looming tariff challenges.

Financial policymakers have high hurdles to adjust Japan’s monetary policy for yen stabilization, especially while the Bank of Japan is focused on reaching its 2% inflation target amidst the economic strains caused by tariffs.

Following Kato and Bessent’s meeting, Japan’s top trade negotiator Ryosei Akazawa is scheduled to visit Washington next week for another round of bilateral trade talks.