Bessent urges ‘sound’ BOJ policy to address excess FX volatility

WASHINGTON, Jan 14 : U.S. Treasury Secretary Scott Bessent met Japanese Finance Minister Satsuki Katayama on Monday and “emphasized the need for sound formulation and communication of monetary policy,” the U.S. Treasury Department said in a statement on Wednesday.

“Noting the inherent undesirability of excess exchange rate volatility, the Secretary also emphasized the need for sound formulation and communication of monetary policy,” the department said about the meeting.

The remarks came as markets brace for the chance of Japan intervening in the currency to reverse the downtrend in the yen, which has fallen to an 18-month low earlier this week.

The yen rebounded on Wednesday after Katayama issued another verbal warning, saying officials would take “appropriate action against excessive currency moves without excluding any options.”

The yen strengthened 0.43 per cent against the greenback to 158.46 per dollar on Wednesday. It earlier had reached 159.45, the weakest since July 2024.

After her meeting with Bessent in Washington, Katayama had said the two had shared concerns over what she called the yen’s recent “one-sided depreciation.”

Bessent, for his part, has repeatedly signalled that the yen’s weakness can be better addressed through faster interest rate hikes by the Bank of Japan (BOJ). In October, he urged the government of Prime Minister Sanae Takaichi, an advocate of loose monetary policy, to allow the BOJ to raise rates and avoid excessive yen declines.

The BOJ raised interest rates to 0.75 per cent from 0.5 per cent in December on the view Japan was making progress in achieving its 2 per cent inflation target.

Critics have said the slow pace of rate increases has been behind the weak yen, which gives exports a boost but raises households’ cost of living through higher import prices.