Bessent affirms close US-Japan ties in tackling currency volatility

The United States and Japan have reaffirmed close coordination in tackling excessive volatility in currency markets, according to comments from US Treasury Secretary Scott Bessent following meetings in Tokyo.

Bessent confirmed through a post on X, formerly known as Twitter, that the two countries continue to maintain “constant and robust” communication regarding foreign exchange market movements.

His remarks came after discussions with Japanese officials, including Finance Minister Satsuki Katayama.

“In my meeting with Minister @satsukikatayama, I was pleased to reaffirm the strong economic partnership between the United States and Japan,” Bessent wrote on X.

“The level of communication and coordination between our teams in addressing undesirable, excess volatility in currency markets continues to be constant and robust,” he added.

Bessent also said discussions covered the US-Japan investment agreement, cooperation on critical minerals, and US support for Japan’s efforts to build an investment screening mechanism.

Yen strengthens after Bessent comments

The remarks initially triggered strong movement in the Japanese Yen.

The USD/JPY pair dropped sharply to near 156.70 after the announcement, reflecting renewed buying in the yen.

However, the pair later recovered most of its losses and rebounded to around 157.45, close to its intraday high of 157.75.

The currency reaction highlighted market sensitivity to any signals from Washington regarding Japan’s recent yen-buying intervention efforts.

Japan has been attempting to support its weakening currency, which has increased import costs and added pressure on the domestic economy.

The dollar briefly climbed to around 157.72 yen after Bessent’s remarks, before falling abruptly to 156.74 yen.

It was not immediately clear whether the move was linked to market intervention.

Japan says intervention aligns with US agreement

 ​Japanese Finance Minister Satsuki Katayama said she confirmed with Bessent that Japan’s response to currency moves remains consistent with a joint statement signed with the United States last September.

The agreement allows foreign exchange intervention when excessive market volatility threatens economic stability.

“Given current circumstances, we strongly confirmed anew the need to continue coordinating closely on market moves,” Katayama told reporters when asked about recent suspected intervention by Japan to support the yen.

She added that both countries discussed “deepening our coordination on various fronts” when asked whether Washington could take a more active role in addressing sharp declines in the Japanese currency.

Japanese policymakers appear hopeful that public backing from the United States could strengthen the impact of Japan’s market intervention efforts and slow the yen’s decline.

BOJ policy remains in focus

Despite speculation in markets, neither side publicly discussed the monetary policy stance of the Bank of Japan.

Katayama declined to comment on whether Bessent raised the issue of interest rate policy during the meeting.

Bessent also made no public remarks regarding the BOJ.

Some analysts had expected Bessent to encourage faster interest rate hikes from the BOJ as a way to support the yen.

BOJ Governor Kazuo Ueda is scheduled to return to Tokyo on Wednesday after attending a meeting of the Bank for International Settlements in Switzerland.

It remains uncertain whether he will meet Bessent before the Treasury Secretary concludes his three-day visit.

Recent pressure from rising oil prices has also intensified debate within the BOJ about the need for higher interest rates.

According to a summary of opinions from last month’s BOJ meeting, some policymakers argued that rates may need to rise soon, with one member raising the possibility of a move in June.

Japan has also considered the possibility of intervening in oil futures markets, viewing speculative energy price increases as a contributor to yen weakness.

However, Katayama clarified that no such action has been taken so far.

In addition to the currency discussions, Bessent met Japanese Economy, Trade and Industry Minister Ryosei Akazawa, with both sides agreeing to strengthen cooperation in energy and critical minerals.

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