Bessent clears way for Japan to act on weak yen

U.S. Treasury Secretary Scott Bessent told Prime Minister Sanae Takaichi and Finance Minister Satsuki Katayama in Tokyo on May 12 that foreign exchange volatility is “undesirable,” effectively allowing Japanese authorities to take steps to support the weak yen.

Bessent’s meetings covered a range of U.S.-Japan economic issues, with currency policy a central topic. Japan has faced a depreciated yen that raises import costs for consumers and increases expenses for companies that rely on foreign inputs.

By calling exchange-rate swings “undesirable,” Bessent provided diplomatic space for Japan to consider measures to stabilize or strengthen the currency. Possible responses include public statements, market intervention, or tacit U.S. acceptance of interest-rate increases by the Bank of Japan.

Bessent has a long personal relationship with Bank of Japan Governor Kazuo Ueda. The trip was his 54th visit to Tokyo, giving U.S. officials a direct channel into thinking at the central bank.

Bessent also noted Japan’s economic resilience during the visit. The Nikkei index surpassed 50,000 in October and remained at elevated levels during the period of talks. U.S. equity indexes were trading near notable highs around the same time.

Japan committed $550 billion to a U.S. investment fund during the visit. Officials discussed that pledge alongside ongoing defense cooperation with regional partners.

If the Bank of Japan raises interest rates, a stronger yen could prompt large Japanese institutional investors to repatriate overseas holdings. Such flows would be likely to put upward pressure on Japanese bond yields and could affect U.S. Treasury yields if Japanese demand for dollar assets shifts.

Officials encouraged market participants to monitor Bank of Japan communications in the coming weeks. Bessent’s ties with Governor Ueda and the public U.S. stance on exchange-rate volatility mean future BOJ statements and policy meetings will be watched for signs of any policy change.