Japan’s top currency diplomat Atsushi Mimura denied a media report that U.S. Treasury Secretary Scott Bessent told his Japanese counterpart at a bilateral meeting in Washington that a weak dollar and a strong yen were desirable. “As we have said, the U.S. side did not touch upon exchange-rate targets in the finance minister talks,” Mimura told reporters. Japanese Finance Minister Katsunobu Kato and Bessent had their first face-to-face talks on Thursday on the sidelines of the International Monetary Fund and World Bank meetings in Washington.
On Saturday, Kato also denied the report on social media, reiterating that they did not discuss exchange-rate targets or a framework to manage yen rates. At a press conference, Kato remained tight-lipped on the details of the 50-minute meeting with Bessent, declining to comment on whether the U.S. made any specific requests to Japan. President Donald Trump’s focus on addressing the U.S. trade deficit and his past remarks accusing Japan of intentionally maintaining a weak yen have fueled market expectations that Tokyo will face pressure to strengthen the yen’s value against the dollar, potentially giving U.S. manufacturers a competitive advantage.
Bessent described his talks with Kato as “very constructive” in a social media post, adding, “I was pleased to follow up on previous reciprocal trade discussions between the United States and Japan, as well as to discuss matters pertaining to exchange rates.”
The meeting between Bessent and Kato comes at a time when Japanese decision-makers are trying to curtail the recent surge in the yen, which has appreciated by nearly 13% against the dollar since last July.
No yen rate discussion
The yen is currently trading around 140 to the dollar, threatening to limit the profit margins of Japanese firms.
Another key issue is capital flows between the countries, as money moves out of the dollar into safe havens like the yen. Paradoxically, Washington also wants a stronger yen to limit dollar diversification, which Bessent is expected to advocate for. The Bank of Japan’s slow pace in lifting its policy rate, an action that would attract further capital flows into Japan, is likely to create additional tensions between the nations.
Washington favors a weaker dollar against the yen to help narrow the trade deficit, a stance that could push Japanese financial authorities to lift rates. The meeting between Bessent and Kato could bring much-needed clarity to these economic policies, highlighting the intricacies of international finance and the challenges faced by both countries in navigating their economic strategies amidst a complex global landscape. Further discussions and policies will be closely watched as they could have profound implications for global markets and the economic relationship between the U.S. and Japan.
