U.S. Treasury Secretary Scott Bessent and Japanese Finance Minister Katsunobu Kato met on the sidelines of the Group of Seven finance ministers gathering in Banff, Canada, where they agreed that the dollar-yen exchange rate currently reflects market fundamentals, according to a statement from the U.S. Treasury Department.
However, the Japanese side did not confirm this assessment, with Kato stating he did not discuss exchange-rate levels and emphasizing that currency rates should be set by markets.
Following the U.S. statement, the dollar briefly rose to 144.40 yen before retreating below 143.50 yen after the lack of confirmation from Japan. Japan’s top currency diplomat, Atsushi Mimura, clarified that neither side discussed specific currency targets or current rates, explaining that the U.S. likely referred to the shared principle that currency rates should be market-determined and that excessive volatility is undesirable.
The U.S. statement appears aimed at countering market speculation that Washington would pressure Tokyo to strengthen the yen, a move that could give U.S. manufacturers a competitive advantage amid concerns over the U.S. trade deficit. Senior strategist Katsutoshi Inadome noted that Bessent likely sought to prevent expectations of a stronger yen from building in the markets.
Japan and the U.S. have agreed to separate the sensitive issue of currency rates from direct trade negotiations, leaving such discussions to their finance ministers. The yen, which has strengthened about 9% this year amid trade uncertainties and safe-haven demand, remains a concern for Japanese policymakers due to its inflationary impact on import costs and consumption.
Kato did not discuss Japan’s holdings of U.S. Treasuries during the meeting. Earlier in May, he surprised markets by suggesting Japan might use its more than $1 trillion in Treasuries as leverage in trade talks, though he later clarified that his comments did not imply potential sales.
