Japan’s Kato says will discuss FX with US Treasury Secretary Scott Bessent

Lallalit Srijandorn FXStreet

Japan’s Finance Minister Shunichi Kato said on Friday that he would seek to meet US reasury Secretary Scott Bessent to discuss foreign exchange. Kato added that excessive FX moves damage the Japanese economy.

Key quotes

Will discuss FX with Bessent in line with points agreed in prior talks.
FX should be determined by market.
Excessive FX moves damage economy.
Convinced that Bessent is a reliable counterpart able to have constructive dialogue, will continue to closely coordinate with him.
Reaffirmed with Bessent in talks on April 24 that excessive Forex volatility has averse impact on economy.
Will continue talks with him based on this understanding.
Will seek to have a meeting with Bessent, discuss FX and other matters.

Market reaction

At the time of writing, the USD/JPY pair is trading 0.06% lower on the day to trade at 145.60.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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