US Treasury Secretary urges Bank of Japan to act on weak yen

U.S. Treasury Secretary Janet Yellen has directly called on the Bank of Japan to implement policies that will support the yen, emphasizing that currency intervention alone is insufficient to reverse its recent depreciation. Her remarks signal a strong U.S. desire for Tokyo to take more decisive action to stabilize the Japanese currency.

“

Intervention can send a signal to the market, but ultimately it is policies that change the market.

Yellen stated that while market interventions can send a signal, it is ultimately policy adjustments that drive lasting market changes. She specifically alluded to the need for the Bank of Japan to narrow the interest rate gap between Japan and the United States, suggesting this is key to providing sustained support for the yen. This comes after the U.S. and Japan jointly intervened in currency markets on July 31 to curb the yen's decline.

“

I am confident that Governor Ueda will take appropriate measures.

The yen's weakness has been largely attributed to the significant interest rate differential between Japan and the U.S. Yellen expressed confidence that Bank of Japan Governor Kazuo Ueda would take appropriate measures, indicating an expectation for further policy action. She stressed that yen stability is critical not only for Japan but also for the broader global economy, warning that a sharp yen depreciation could trigger declines in other currencies.

“

The yen's stability is important not only for the United States but also for other regions.

Beyond currency concerns, the coordinated intervention has also brought renewed attention to the potential risks associated with Japan, a major holder of U.S. debt, potentially selling its American bond holdings. While China has historically been viewed as a potential source of such market disruption, Japan currently holds approximately $1.14 trillion in U.S. Treasury bonds. The U.S. Treasury's focus extends to the potential ripple effects on the U.S. bond market should Japan adjust its overseas assets to support the yen.

“

The coordinated intervention shows that the United States not only pays attention to the impact of the yen's depreciation on the global foreign exchange market but also must consider the chain reaction that may be caused by Japan's adjustment of overseas assets to support the exchange rate on the US bond market.