US Treasury Urges Bank of Japan to Raise Interest Rates Amid Yen Weakness

The U.S. Treasury Department has urged the Bank of Japan (BOJ) to continue raising interest rates to strengthen the Japanese yen and address bilateral trade imbalances with the U.S. This recommendation, featured in the Treasury’s latest foreign-exchange report to Congress, emphasizes responding to Japan's domestic economic fundamentals such as growth and inflation to normalize the yen’s weakness against the dollar. The Treasury also highlighted that Japan's large public pension funds should invest abroad for diversification and returns, not to influence the exchange rate competitively. Despite this direct advisory, Japan’s Finance Minister Katsunobu Kato stated that monetary policy decisions are solely under the BOJ's jurisdiction and refrained from commenting on the U.S. report. While the Treasury did not label any country a currency manipulator in 2024, it placed Japan on a monitoring list alongside other nations, reflecting ongoing scrutiny of its currency practices. The BOJ’s next policy meeting is expected to maintain the current interest rate, but market speculation continues about future hikes.