▲ Japanese Yen
US Treasury Secretary Scott Bessent stated that the value of the Japanese yen is undervalued and expressed support for Japan's "decisive actions" to address the issue.
The US Department of Treasury announced in a press release on the 1st local time that Secretary Bessent made the remarks during a meeting with Bank of Japan Governor Kazuo Ueda on August 30 at the Group of 20 (G20) Finance Ministers meeting in Asheville, North Carolina.
Secretary Bessent expressed "strong support for Japan's decisive market and monetary policy actions to address the problem of the substantial undervaluation of the yen."
He emphasized that "the depreciation of the yen is contributing to mounting domestic inflationary pressures in Japan," adding that "it is important to formulate sound monetary policy and appropriately communicate it (with the market) in order to anchor inflation expectations and avoid excessive exchange rate volatility."
He went on to say that "close coordination between the United States and Japan is crucial regarding our shared macroeconomic priorities."
Secretary Bessent's emphasis on "sound monetary policy" and "market communication" is interpreted as meaning that the Bank of Japan should pursue interest rate hikes and clearly signal to the market that rates will rise, in order to prevent an excessive decline in the value of the yen.
Earlier, Erin Brown, US Deputy Assistant Secretary of Treasury for International Affairs, stated in an interview with NHK that Secretary Bessent met with Governor Ueda and Japanese Finance Minister Satsuki Katayama (on August 31) to emphasize fiscal sustainability in Japan and clarity on interest rate hikes.
Secretary Bessent reportedly told both Governor Ueda and Finance Minister Katayama that "as a next step, it is important to clearly present to the market the path toward fiscal sustainability or interest rate hikes."
The next steps he referred to are believed to mean measures following the joint large-scale purchase of yen and foreign exchange market intervention by the US and Japanese governments at the end of July.
At the time of the two countries' joint currency intervention, the yen hit a 40-year low at around 164 yen per dollar, before falling back to the 155 yen level following the market intervention.
However, evaluations are emerging that the effect of the market intervention has faded as the yen climbed back into the 160 yen range, briefly reaching 160.20 yen in the New York foreign exchange market on August 28.
Deputy Assistant Secretary Brown urged the Japanese government's response to stabilize the yen's exchange rate, stating, "At this point, there are limits to intervention. From here on, policies are what matter."
Kyodo News reported that Finance Minister Katayama said during her meeting with Secretary Bessent that "an orderly yen exchange rate is essential for the stability of global financial markets, and we confirmed that the continued and coordinated efforts of the US and Japan contribute to this common objective."
Finance Minister Katayama also stated that she will lower the ratio of debt outstanding to gross domestic product (GDP) to "achieve both a strong economy and fiscal sustainability."
However, the Japanese government's budget request for next year is projected to reach 143 trillion yen (approx. 1,224.3 trillion won), marking a record high for the fourth consecutive year.
Overlapping with Japan's expansionary fiscal stance, rising US crude oil futures prices, and the aftermath of higher US long-term interest rates driven by expectations of mounting inflationary pressures, selling pressure dominated the Japanese government bond market, leading to sustained interest rate increases.
In the Japanese government bond market on the 1st, the yield on 10-year government bonds briefly touched 2.990% during the morning, bringing it to the brink of entering the 3% range, which is the highest level in about 30 years since 1996.
(Photo: Yonhap News)
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